KPMG will conduct Medicine Hat’s energy business review

Medicine Hat – On Sept. 5, 2023, Medicine Hat City Council directed administration to convene an independent third-party review of the City’s energy business to confirm overall strategic approach to ensure best value for the community. Through a request for proposal (CMH23-113), the City of Medicine Hat awarded the contract to KPMG LLP. A number of strong parties submitted proposals and KMPG LLP emerged as the top vendor with their combination of proven expertise across a number of the required knowledge areas including municipal government, Alberta electricity market, commodities, rate design, financial strategy, regulatory and more.

The City of Medicine Hat owns and operates its own electric generation and natural gas production business and remains the only municipally-owned commodity business of its kind in Alberta. The City also owns and operates its own electric and natural gas distribution businesses and is the sole electric retailer within the local electric franchise area.

The intent of the review is to ensure that ownership, governance, financial, rate design approach, and other relevant considerations are assessed to deliver optimal value for the community in light of changing community and external circumstances.

“The innovative spirit of our forefathers established an energy business that provided an exceptional quality of life for Medicine Hat residents for more than a century,” said City Manager, Ann Mitchell. “With the transition to a low-carbon future looming, we must ensure that the way we manage this business makes sense, and that we are willing to adapt in a way that benefits both our current and future generations. I am eagerly awaiting the results of this review to shape the future of our energy business.”

During contract negotiations, the City of Medicine Hat and KPMG mutually agreed to include the City’s electricity and gas distribution business in the project, shifting the focus from a ‘COMCO review’ to an ‘energy business review’ to consider all energy related business units given their natural interdependencies and synergies. However, KPMG will not review the current 'cost-plus' rate design for distribution, as it already aligns with the standard approach used by other regulated utility distribution systems.

“We are undertaking this exercise largely in response to public feedback and plan to openly share status updates and milestones as appropriate through Energy, Land and Environment Committee and on our website,” said Mitchell. “However, it is important that the community understands up front that KPMG is bringing their expertise to bear on these complex topics and, consistent with their RFP response, will not be conducting community consultation as part of their review.”

The results of the independent third-party energy business review are expected to be presented to City Council by the end of 2024. Follow along at www.medicinehat.ca/EnergyBusinessReview.

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