Rochelle Pancoast, the city's director of strategic management and analysis, told council Monday her office needs a more specific request before it starts reviewing the city's utility rates.--News Photo Collin Gallant
cgallant@medicinehatnews.com@CollinGallant
City councillors have sent back a request from staff to narrow down a review of utility rates, asking them to better define their request, but with some asking for more scrutiny of the public ownership model, and some less.
That places the rate review back at the committee level more than one year after it was requested.
“It made sense to me, and it’s unfortunate that we’re going back to the drawing board,” said Mayor Linnsie Clark, who cast one of two votes in favour of suggested scope for the review presented at Monday’s council meeting.
It would have asked staff to limit the review to the city’s electricity business, “outline the merits of ownership” of the power plant by the city and provide options “for allocating the benefits of ownership across stakeholders.”
That was too vague, according to Coun. Darren Hirsch, who led debate against the motion, and said if a review is to be done, it should examine all facets of the utility ownership.
“I read (the proposal) as a reinforcement of the status quo, and I think we should look at the good, bad and ugly,” said Hirsch.
Committee chair Coun. Alison Van Dyke said Hatters proved they back the public ownership model – she campaigned heavily on it in the 2021 election – but the public also wants to understand rate setting.
“I hear repeatedly from the public that they want clarity, and we’ve had it on the list since February of 2022,” said Van Dyke. “It’s a broad request, but it would have directed administration to do the work.”
A rate review was called for in early 2022 shortly after the new council term began and newly elected councillors were asked to approve annual rate changes just as commodity rates began to increase sharply.
Since then however, the item has sat on an “outstanding items” list until it was reassigned to a separate committee last month when administrators suggested the parameters be set.
That language though, fell by a 6-2 vote, with those opposed stating it presupposed the outcome, and it was returned to the economic, land and strategic planning committee, headed by director Rochelle Pancoast.
Pancoast said the 2022 request, as worded, could require work to examine the five utility services, including water and sewer rates, and should be limited to power prices where the city, as the producer, has the most flexibility to set rates.
And, she said, abandoning high-cost, low-production wells since 2019 has left the city buying about 90 per cent of the natural gas it resells off the Alberta market system. It simply adds a markup to its cost recovery model.
“We completed broader utility bill comprehension and understanding (work) a year ago, but when we consider (a review’s) scope, we … already set rates as a cost-recovery-plus basis,” she said. “There’s very little that we have discretion on other then allocating (profits).
“Part of the question is whether we’re distributing dividends (to the city treasury) or returning them directly to the rate payer.”
Coun. Shila Sharps said the review should be wider and potentially examine creating and operating the power utility under an arm’s-length “municipally controlled corporation,” similar to Epcor and Enmax in Edmonton and Calgary, respectively.
“It’s not ‘tell us what’s right,’ but ‘tell us what we might be missing,'” said Sharps.
Coun. Ramona Robins said Monday she agreed with a potential examination of rates, but is satisfied the utility division provides strong value for Hatters through the dividend system.
“There’s nothing I’ve seen to prove otherwise,” said Robins, who voted against the proposal.
Coun. Andy McGrogan said a wholesale review of the business model would be a massive undertaking.
“I do see (the language) as problematic,” he said. “It’s a big undertaking.
Hirsch also said the terms of the review as proposed could have major implications for the city’s dividend model, which provides portions of profits to the city treasury, and which has been changed twice in the past three years.
That dispersal model used outsized power profits to cover losses in the gas division and provide $83 million to city infrastructure, reserve and long-term savings funds.
