Budget deliberations are set to begin Nov. 17 after newly elected councillors were provided an informational presentation on Medicine Hat's energy production and distribution and how it affects the budget.--NEWS PHOTO BRENDAN MILLER
bmiller@medicinehatnews.com
New members of council were provided information on the overall state of the city’s financials and how Medicine Hat’s energy business makes money before heading into budget talks on Monday.
As Medicine Hat is in a unique position with ownership of its own energy business, city staff wanted to give councillors information they will need when it comes to natural gas distribution, electric distribution, natural gas production and electric generation.
Travis Tuchscherer, director of energy marketing and business analysis, explained to council on Monday that Medicine Hat has a direct connection to the Nova gas transmission line, which provides additional gas to the city’s residential and business customers.
Councillors also learned the city generates approximately 285 megawatts of electricity, which serves all customers and imports any excess onto the province’s grid that, at times, generates revenue.
Tuchscherer cited the volatility of energy commodity prices and provided council data from 2018 to 2023 showing a significant gap in earnings.
During that time period prices increased five-fold from net income gains from electric generation in 2018 at below $20 million, to surpassing $120 million in 2023.
Councillors were also provided an annual dividend summary over the past 10 years showcasing the city’s electric business hitting a high in 2023.
“We’ve done well so far,” said Tuchscherer, who also provided council a graph showing growth of the Medicine Hat Endowment Fund, beginning with a balance of zero in 2017 and climbing near $200 million in 2023.
However, Tuchscherer says supply and demand drives market pricing and new government policy is changing rates.
“There’s also changes to carbon policy on the federal level and impacts to our provincial level as well,” he explains.
Councillors were then provided an understanding of how the city calculates utility rates, which pay for building, maintaining, administering, operating and replacing utility infrastructure and related services.
Tuchscherer told councillors that utility rate increases are typically caused by inflation of goods and services, aging infrastructure and unexpected reduction in consumption or demand.
“The AUC (Alberta Utilities Commission) regulates gas and distribution rates in Alberta, however Medicine Hat calculates our rates based on the AUC principles, and the city council is the regulator for us,” explained Tuchscherer.
Councillors learned the city uses three main steps to calculate rates, which include the revenue requirement, cost allocation and rate design.
First, city staff determine its revenue requirement by adding all cash operating expenses, depreciation and regulated return on assets.
The city is able to allocate costs to rate classes such as residential, farm, small commercial, medium commercial, large commercial, industrial and street lighting.
“From there, then we drill down into each rate class and determine the billing mechanisms that will charge our customers to recover those rates or to recover those costs,” said Tuchscherer.
The city recovers the cost to build and maintain the electric transmission and distribution infrastructure through distribution rates, and a majority of these system costs are to meet peak demand of customers on the system.
These current costs are provided to all rate customers on the city’s website under its “Utilities” tab.
City staff estimate the average utility costs for residential ratepayers in 2026 will be $3 higher at $108.42, compared to $105.37 in 2025, and roughly $70 per month below provincial average.
The presentation also highlighted how electricity is generated and transmitted through Medicine Hat, the province’s wholesale power market and price settings, as well as maintenance and capital funding requirements for the power plant, like full engine replacement.
The previously approved 2026 budget for the electric distribution unit was also highlighted for councillors, showing a cost recovery model and proposed rates expected to be voted on during the Nov. 17 meeting.
