The long-awaited public hearing regarding a possible shifting of the city's energy business to a municipally controlled corporation is set for Tuesday at 4:30 p.m.--NEWS FILE PHOTO
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The public will have a say next week on whether one of the last public utilities in Alberta should be managed by an arm’s length corporation owned by the City of Medicine Hat.
That was suggested by a business consultant last fall when KPMG argued that balancing political considerations in business decisions could hold back the 100-year-old power generation business that it says will be stressed to keep producing large profits to help balance the municipal budget.
Hundreds of Hatters attended protest meetings two years ago when prices spiked, and dozens spoke at a hearing toward imposing a much reduced rate that fall.
Administrators, elected officials and critics are expecting a large crowd and long public hearing Tuesday on creating a municipally controlled corporation, beginning at 4:30 p.m. in council chambers.
Mayor Linnsie Clark said she is keeping an open mind ahead of the hearing, but has said a change so large should be an election issue this fall.
On Friday she said both options – an MCC or city department model – predict at least several years of low profits, which for decades have subsidized taxes and helped the city’s balance sheet, and the question now is who decides and approves the course of action.
“There’s a philosophical question about how a public utility should be run,” she said Friday. “The brass tacks are about if rates will be affected and how, and whether the city’s bottom line with be affected, and how.”
City finance and energy officials have long warned about profitability in the face of changes to the Alberta power market, capital reinvestment needs staff say would be $500 million before adding low-carbon generation such as the Saamis Solar Park, and the need for cash reserves to meet municipal goals.
“Those (answers) come later,” said Clark.
From the hearing, she hopes administrators will lay out the case for adding a standalone operation rather than strengthening and adding resources to a utility that remains a city department.
KPMG’s rationale is an MCC could maintain disciplined business decisions, as well as do a better job of meeting challenges more quickly.
This comes after power profits fell 90 per cent between a record export pricing market in 2023 and last year when prices collapsed.
An MCC, it stated, could better withstand the slump and therefore have a better chance to provide dividends in the long term, and council was taxed to manage complex industry, act as regulator on rates and balance political decisions.
A group calling itself the Medicine Hat Utility Ratepayers Association has opposed the idea. This week the group released a list of nine questions and positions on the MCC, which generally calls to keep the city department model, but enact reforms, like spending restraint to lessen the need for profits from the business units.
The group has met on several occasions with city staff and this month packed an open house.
“At the end of the day, is an MCC accountable and transparent to taxpayers,” said MHURA president Sou Boss. “They are taking it private to make money; how does that money come back to taxpayers?”
Among other MHURA positions are better outlines of:
– Transparency of the MCC corporate board that will include recruited industry professionals and two city councillors;
– The makeup and motive of the rate-setting committee that officials say will act as a vessel of council;
– A focus on affordability over profitability.
The group says the city could strengthen its decision-making by employing consultants while maintaining council as an avenue of public governance.
A public hearing is a requirement ahead of an MCC vote at a subsequent meeting, as is disclosure process.
A “frequently asked questions” section on the city’s website includes more than 6,000 words to answer 74 of the most commonly submitted questions, ranging from board makeup, transparency, rate setting, financial particulars, accountability structure and future dividends.
“Our goal is to inform people of the information, and that can focus the discussion at the public hearing,” said energy division head Rochelle Pancoast, who felt the overarching work has been to make distinctions about “what an MCC is and isn’t” for citizens.
She felt most vocal critics of the plan see it as a sale to a private company.
“We would simply move (the energy division) into a separate legal entity 100-per-cent owned by the city,” she said
“The other assumption is that as a monopoly (in the franchise area), the MCC would prioritize profits and significantly increase rates in the community.”
A rate review committee would acts as one of several “checks and balances,” she said, but the central thrust is to maintain reasonable rates and the city’s grandfathered franchise area (which protects Hatters from paying hundreds each year in provincial transmission fees). Therefore it wouldn’t grow as large or costly to operate an Enmax or Epcor.
The MCC would also have a natural incentive to develop business activity – a city goal – and reduce costs to compete for export dollars on the Alberta grid. Those lower costs would maintain or improve profits without raising rates.
Councillor an energy committee chair Darren Hirsch has said the city is “not reinventing the wheel” considering an MCC to operate a business unit.
Another council veteran, Robert Dumanowski, has said the public supports publicly owned utilities, and argues that an MCC is still under the control of a publicly elected body.
