City council OKs major utility relief package

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City council OKs major utility relief package

December 6, 2023

Medicine Hat city council has approved $33 million in “cost relief” over the next three months – one-third more than an initial proposal – while utility officials will study creating a “best in market” price for the fall ahead of a business model review.

It’s a package to quell rising anger over perceived profiteering at the municipally-owned power plant, and debate drew about 250 interested ratepayers to the council gallery Tuesday – one week after 500 peppered council members at a public meeting,

It comes as the city’s power generation unit, which also sells into Alberta’s volatile market, is on pace for $135 million profit in 2023.

But that has also occurred as local prices that are tied to the provincewide average quadrupled in some cases this summer over the last year.

“There’s certainly emotion in the room and we all know the community is hurting – that’s not lost on councillors,” said Coun. Robert Dumanowski.

“Unusual times call for an unusual response. We all strive for stability in mortgages, utilities, the price at the pump, and now we’ve shifted into uncertainty. As the municipality we can provide some stability.”

Council, which delayed a rate review in July, voted 9-0 Tuesday to approve a third-party review of how city hall views the 110-year-old power company’s profits and its business goals.

Interim measures include relief credits on bills worth $800 for residences and $2,000 for small and medium businesses over the next three months.

A separate motion on directing an interim rate, based on a “best in market” philosophy and a review of the power plant’s business model, was also approved.

The crowd jeered councillors at times, but remained well behaved during a 75-minute debate on relief that administrators insist is targeted at general cost pressures faced by citizens and not specially utility costs.

The city’s energy division will also perform a business review to answer calls for wholesale change in rate-setting philosophy (i.e. fixed vs. default).

“This goes beyond a rate review, but a holistic look at the business,” said energy managing director Rochelle Pancoast. “We believe it’s a broader view that needs to be done, rather than just us chasing the market,”

Pancoast said they began offering fixed-rate contracts based on requests from the community in 2022, and now they are hearing the opposite in large numbers

An interim review could be developed by early October and more about the business review in early December.

Coun. Roman Robins said she sees great value in the utility and keeping it profitable, but cost pressures are mounting.

“You can do your level best, and still not be able to afford things,” she said. “We need people to be able to afford to live here, and we need to go all in on this issue.”

At the end of June a special offer six-month rate expired and accounts fell back onto default pricing near 30 cents unless customers signed a new fixed term for 12 months at 16.

“It’s the largest ever relief program ever considered,” said corporate services director Dennis Egert. “It’s meant to deliver immediate cost relief, a second would bring interim rates based on best in market rates in the province … and commence a third party review of the Comco (commodity units of gas and power) business.”

Finance director Lola Barta said the “cost pressure relief” program should be considered as a cost based on several factors in the community and isn’t being considered a “utility rebate,” though it is being distributed on utility bills for reasons of ease.

About 32,500 residential utility accounts would receive $200 credits per month for four months from August to November, including a $400 credit on the bill mailed after Sept. 18, then $200 in the next two billing cycles. The figure also includes individuals within condo associations that typically receive a single bill.

Another 3,500 customers in the small and medium business-rate class would receive $2,000 spread over the next three bills in the same fashion.

That was increased from $600 and $1,500, respectively, on a motion put forth by Coun. Shila Sharps.

That would include all ratepayers in Medicine Hat’s franchise area, which includes about 12 per cent of the customer base that lives in Redcliff and small portions of Cypress County.

“It’s unprecedented in the history of Medicine Hat, where historically dividends have gone to the city for the form of tax (subsidies),” said energy committee chair Coun. Alison Van Dyke, who suggested but could not get support to limit payments only to Hatters. “This is a significant departure.”

The utility department would also waive any disconnection fees, late fees or non-sufficient payment fees attached to July to September bills and credit any already paid onto the next bill.

The funds, totalling $33.1 million, would come from the city’s operating reserve.

Coun. Darren Hirsch said the community needs to know how the business units interact with municipal cash requirements in the budget.

“I’m happy to have the discussion, because there is a lot of misinformation out there,” said Hirsch.

“I don’t think we’ll have bonanzas for very much longer … I’m glad that we have the reserves that allow us to do this. In COVID, the bell rang and we answered the bell, and I’m happy we can offer this (program) now.”

The city provided $10 million in relief programs over two years in 2020 and 2021, and held tax increases at zero, those years.

The reserve system has also provided cash to the city to fill a budget gap – almost $12 million this year – rather than additional tax increases, and planners say that by 2025, a specific reserve fund paying interest will carry $5 million of the general tax burden.

“We can’t live on our commodity business in some years, and we try to make sure that we are putting money aside as well,” said Barta.

As it is, an expected capital reserve of $200 million by year end would fund $50 million per year by 2027 to maintain existing infrastructure. That’s not including modernizing the power plant to abate carbon, add green production, or build new recreation facilities suggested in a report last month.

A motion about the scope of the review of the business model was ongoing at press time. More information will be included in Thursday’s edition.

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