City of Medicine Hat prepared despite energy revenue drop, official says
A continued drop in Medicine Hat’s utility rates this summer means the city’s energy business will pull in less revenue than forecasted in 2024, a reality an official says city hall is prepared for.
While natural gas rates are typically lower in the summer when homes do not require as much heating, electricity prices on Aug. 1 dropped to its lowest allowed rate.
Travis Tuchscherer, the city’s director of energy, marketing and business analysis, said he’s not surprised considering the roller coaster that is utility rates.
“That has caused a negative variance from our forecast at the beginning of the year, but it is something that we are used to,” Tuchscherer told CHAT News.
“Markets are volatile, so we’re used to seeing some variances from the forecast.”
The decrease hasn’t set off alarm bells for the city, he explained.
“It’s not great that we’re seeing a bit more of a down year but it gets offset from the good years we’ve had in the past,” he added.
Medicine Hat owns its own utilities and, therefore, sets the rates. It aims to balance the goal of its energy business to make money with having fair prices for residents.
The August electricity billed rate for residential and small to medium businesses was set at $0.07705 per kilowatt hour, a slight decrease from the $0.07842 per kilowatt hour price in July.
READ: Medicine Hat bounces off lowest allowed electricity rate
It’s the lowest possible electricity rate under the city’s Electric Utility Bylaw 2244 that was amended by council in October 2023.
Council directed the city to use a single best-of-market rate for residential, farm, small and medium commercial, unmetered services and rental lighting customers that would not exceed 11 cents per kilowatt hour or dip below a minimum rate of seven cents.
The best-of-market rate, launched in November, was put in place as a stopgap measure in response to a dramatic rise in electricity costs in 2023 as the city awaits the result of a third-party review of its energy business.
The current best of market rate is $0.05680 per kilowatt hour which, under the bylaw, defaults to the minimum $0.07000.
Under the previous rates system that caused skyrocketing utility rates a year ago, the rate would for August would have been “north of seven cents”, according to Tuchscherer.
While that would have made more cash for the energy business, Tuchscherer said the current system is a better pricing methodology for the people of Medicine Hat.
“From a customer standpoint, they’re seeing seven cents versus a higher price if we were under the old methodology,” he said.
Sounantha Boss, president of the Medicine Hat Utilities Ratepayer Association, told CHAT News on Thursday the current electricity rate is “a good compromise”.
Her comment comes a year after the rates controversy that sparked the advocacy association’s creation when electricity rates skyrocketed in August 2023.
Backlash from residents, including Boss, forced the city to introduce a $33 million relief fund in September 2023.
“The city is listening,” she said.
Boss praised the low electricity costs, saying they are great for residents and businesses.
The dip in rates resulting in a lower revenue than forecast for the energy business — and therefore a smaller payout to the City of Medicine Hat — is a lesson in saving money during years of plenty to supplement during years of scarcity, officials say.
Others have criticized the city for raising taxes when it has millions in reserves from years of increased utility revenues.
Outside Medicine Hat’s city limits, the rest of Alberta is going through a restructuring the provincial government hopes will bring some reliability to volatile rates. It is also facing proposed federal clean energy reforms.
It’s difficult to judge the future, Tuchscherer said.
“In 2022, 2023, we didn’t forecast record years; we did get record earnings those years. This year, we did forecast a lower earnings year, and we’re actually coming in lower than that,” he said.
“It just makes planning even more important.”
Eli J. Ridder
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