New energy pricing plans for utility customers start January 1

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Medicine Hat – The City of Medicine Hat introduced new energy pricing plans for electricity and natural gas that take effect Jan. 1, 2023.

The new rate design, which was approved by City Council on Nov. 21, achieves three objectives:

  • Offer more choice for customers when selecting their preferred utility spending option;
  • Better align City of Medicine Hat’s plan offers to those available elsewhere in the province;
  • Manage risk to protect the City’s historical and current investment in commodity production assets (referred to as COMCO) by ensuring commodity rates are closely aligned with market prices.

For residential, farm, and small and medium commercial customers, the new offerings for both electricity and natural gas include a Regulated Rate Offering (RRO), which is also referred to as the “default rate,” and two contract options: fixed and variable.

Regulated Rate (default)

Customers who do not have a contract are charged the default Regulated Rate which is a monthly price set at the beginning of each month. The rate for natural gas is now calculated based on the weighted average 120-day buying window price the City pays for the forecasted volume of natural gas used in the Medicine Hat market area. The City of Medicine Hat continues to calculate the monthly electricity rate based on the average of the rates using the four Regulated Rate Option providers approved by the Alberta Utilities Commission under section 103(2) of the Electric Utilities Act.

Fixed Contract Rate

The fixed contract rate allows customers to sign up for a fixed commodity rate for a 12-month term (gas or electricity or both) any time during the year. The rate offered for this option will change every three months, meaning there will be four different rates ‘for sale’ throughout the year (announced quarterly). If a customer chooses not to sign on in the first quarter (January to March), they might wait to see what the second quarter (April to June) rate is and sign up then. They would keep that price for the following 12 months at which time the contract will expire and the customer must decide from one of the three options again.

“The misconception for this rate is that we are changing the rate every three months for people on the contract and that is not accurate,” says Travis Tuchscherer, manager of energy marketing and business analysis. “When you sign a contract, you pay that same price for 12 full months. However, the price you are offered when you sign up, might be different than the price another customer is offered if they sign up three or six or nine months down the road.”

Tuchscherer adds, “Think of it like a mortgage. The bank offers different mortgage rates all the time. When you sign your mortgage contract, you get the offer that day. You can’t ask for the interest rates that were offered earlier in the year, because the market has changed. And you don’t know what the interest rate will be tomorrow. The fixed contract plan is similar. It allows the City to better adjust to the market from a business perspective by updating the offer every three months, while offering price stability for those who’d like to lock in for 12 months.”

Customers who choose the Fixed Contract option in 2023 will be charged at the same commodity rate each month but will see variations on their bill due to fluctuations in their consumption.

The City of Medicine Hat’s former fixed rate program offered a set price that was updated annually and in effect for a calendar year on contracts that auto-renewed.

The former fixed rate program will terminate on December 31, 2022.

Current fixed rate subscribers who are past their initial six-month commitment can contact Customer Care at 403-529-8111 or fill out the form at www.medicinehat.ca/fixedrate to start a new six-month term on the former program. Those who do not renew will return to the default monthly rate (Regulated Rate Option) in January or may choose to select one of the new options.

Variable Contract Rate

The third option, new for 2023, is a variable contract which allows customers to sign up for a 12-month contract where each month, the customer is charged an average of the actual daily commodity prices for the month, plus a premium. For 2023, the premium is $1 per gigajoule for natural gas and $0.02 per kilowatt hour for electricity. This rate is set the first day of the following month and each month will have a different price.

“The variable contract is suitable for those who prefer actual market costs and are comfortable with a different rate each month,” says Tuchscherer.

Both the fixed and variable contracts terminate after 12 months at which time the customer will automatically pay the default rate or has the option to sign on to a new contract. The contracts also terminate if the customer moves. When starting a contract, it is effective the next billing cycle.

Customers can review all the new options at www.medicinehat.ca/energyplans. The new fixed rate offering and the January regulated rate for both electricity and natural gas will be announced Jan. 1, 2023. Note the first business day of 2023 is Jan. 3.

Large commercial and industrial

There will also be three electricity offerings for large commercial customers and industrial customers in the new year:

  • Regulated Rate (default)
  • Energy Supply Price (ESP) Contract
  • Variable Contract

 

The City of Medicine Hat looks forward to examining “green” energy options as a viable addition in the future.

“Medicine Hat is unique in that the City is the sole retailer for providing electricity in the area. We operate under a provincial regulatory exemption that recognizes our historical self-sufficiency by allowing us to continue the supply, distribution and sale of electricity in our area,” said Rochelle Pancoast, Managing Director of Strategic Management and Analysis at the City of Medicine Hat. “Because our customers don’t get to ‘shop around’ so to speak, offering more choice in pricing options helps them have more control over their spending and risk preference.”

It is important to understand the benefits of Medicine Hat’s exemption and Managing Director Pancoast continues.

“Because we generate, move and sell our own power, our customers do not pay the provincial transmission charge – and haven’t for decades. They are also not exposed to rate riders that allow companies to make up the difference between actual and projected costs. Medicine Hat area customers can also expect reliable local supply and are not subject to load restrictions when the provincial power grid is stressed. And finally, when the City earns revenues through COMCO, those revenues can be used publicly for the benefit of the community, either through dividends, external investments (and resulting investment revenue), or investment back into operating and capital City expenditures, reducing the burden on residents through other revenue sources like taxes, fees and rates.”

The Utilities Consumer Advocate educates and advocates for Alberta’s small business, farm and residential electricity and natural gas consumers and provides a useful web resource to learn more about the energy market in Alberta. Visit https://ucahelps.alberta.ca/.

The new offers are available starting January 3, 2023, the first business day of the new year. Customers will be able to sign up online in January at www.medicinehat.ca/energyplans, stop by City Hall at 580 First Street SE or contact Customer Care at 403-529-8111 or customer_accounts@medicinehat.ca.

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