Energy business official Travis Tuchscherer speaks at a Medicine Hat city council meeting on April 22, 2025. (Photo: CHAT News Today)

By Eli J. Ridder

Launching arms-length energy agency will cost Medicine Hat millions, city staff say

Apr 23, 2025 | 9:19 AM

Medicine Hat’s council heard Tuesday it will cost millions of dollars to make historic changes to the city’s energy business that experts say is the best approach — ahead of a May decision date when officials will vote on if the municipality should advance to the next stage.

The one-time fee to set up a recommended arms-length corporation to manage the city’s energy assets, removing its political leaders from regular management, is estimated to be $4 to $5 million.

Ongoing operating costs for the municipally controlled corporation’s board, positions and systems will work out to approximately $2-3 million annually — about one to two per cent in annual operating costs.

The proposed corporation’s skills-based board would make decisions separately from the city but would still be owned by Medicine Hat. It could be folded by council in the future.

The aim, said energy division head Rochelle Pancoast on Tuesday, is to divide the three roles council currently plays to set rates, maximize value for taxpayers and make money for the energy business.

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“Very encouraging work,” Coun. Andy McGrogan said after a lengthy presentation Tuesday night.

Other municipalities in Alberta have made similar MCCs for utilities — and other city divisions — while others have voted it down, according to a staff presentation.

The energy business made the city more than $200 million over the 2022 and 2023 cycle. That’s expected to drop to less than $10 million over 2024 and 2025, city officials said last year.

READ: Medicine Hat should spin off energy business into arms-length corporation, auditors say

The recent budget predicted that the city in 2025 would receive about $26 million in profit on power and a $20 million loss on the gas side. In 2026, an $18-million power profit would be cut to almost even by a $17.8 million loss on the gas division.

After electricity prices skyrocketed in summer 2023, the city took a three-pronged approach in response.

The first was approving $30 million in relief that immediately discounted the electricity bills of residents.

The second was stabilizing rates by tying them to a single best-of-market rate for residential, farm, small and medium commercial and other customers that would not exceed 11 cents per kilowatt hour or dip below a minimum rate of seven cents.

That method, which bounced off its lowest-possible rate in August 2024, aimed to provide stability for both ratepayers and the city’s energy business.

Council in 2023 also requested a third-party review of the energy business, leading to the KPMG report.

Beyond the municipally controlled corporation, the third-party review report also recommended a solution for setting rates.

Traditionally, council had to balance setting rates that would benefit its ratepayers while also looking out for its energy business, creating a conflicting role, the report said.

Thus, it suggested the creation of a rate review committee made up of a mix of experts and elected officials.

Staff on Tuesday recommended that there be five voting technical members, including a chair, and a pair of voting councillors. There should also be a one non-voting community observer.

City energy business director Travis Tuchsherer said the rate group would increase transparency and consistency around how rates are set.

Committee members would also be charged with following industry-accepted rate design practices with assurance for fair and competitive rates.

Colleen Graham, the city’s communications director, said the city would go beyond the legally required public hearing if council moves to the engagement stage.

Graham said the focus would be on education ahead of the hearing but disseminating facts for what could be an emotional topic for many Medicine Hat residents.

The goal would be to highlight that residents should see little change in their utility bills and that council remains as the body of authority even with the MCC.

Coun. Alison Van Dyke raised concerns that a municipally controlled corporation may not continue to allow residents with no or poor credit to sign up to plans.

Pancoast said the city’s current standard would continue and the risk would just be reflected in a report to the rate review committee.

Van Dyke said she was opposed to MCC executives receiving millions of dollars in bonuses. In response, Pancoast said c-suite staffers at other energy businesses in Alberta that get such paydays run large multinational corporations, which Medicine Hat’s energy business isn’t.

The councillor raised concerns the MCC would not operate for the public good. Such efforts could be embedded in the shareholder agreement between the corporation and the city, said the energy head.

The city, Pancoast said, would wear the “public good hat” while determining the value the MCC has to the taxpayer, meaning the corporation would have the incentive to run a business that is fair to ratepayers.

Coun. Darren Hirsch asked city staff what the difference is — at this point in the process — between an MCC like Calgary’s Enmax and where Medicine Hat is headed.

“We’re not pioneers in this initiative,” Hirsch pointed out.

Pancoast pointed out that the city-owned energy business is not exposed to provincially-regulated rates and that’s an advantage the KPMG report argues is an advantage should retain.

The rate review committee, she said, will play the role of regulator, replicating the structure outside Medicine Hat.

Mayor Linnsie Clark asked if the city would lose the ability to tack on any unpaid taxes to a utility bill. Pancoast said next steps would research if that would be possible.

Clark said, to her, having a municipally controlled corporation isn’t the easiest way to get to skills-based governance. Because the buck still stops at council, it’s hard to hand off control when it is still accountable at the top.

“It should be an election issue,” Clark said. A civic election is scheduled for Oct. 20. She also emphasized the importance of thorough public outreach.

“Public hearings are fine but aren’t consultation,” Clark said.

The presentation, along with recommendations from third-party experts, will return to council at its May 20 meeting.

Council will need to make a decision on advancing to the next stage, which would include a public hearing before another vote to execute on the municipally controlled corporation and rate review committee.

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