Municipally Controlled Corporation (MCC)

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 City enlisted KPMG LLP to do an analysis of Medicine Hat’s energy business. Following an intensive five-phase project that evaluated the current state of the City’s energy business, a strategic assessment of trends, regulations, and change drivers, options analysis, and recommendations, the review recommends four strategic actions:

1. Establish a rate review committee to support Council in its role of approving energy distribution and commodity rates
2. Expedite the abandonment or sale of the natural gas production assets
3. Establish an independently-governed Municipally Controlled Corporation (MCC) to own and operate the distribution businesses (both natural gas and electricity) and electricity generation business
4. Develop an MCC dividend policy

According to City Manager Ann Mitchell, Council is in an “unenviable position of balancing the needs of three potentially competing interests: the residents, ratepayers, and the business.”

Why is MHURA Challenging the MCC?

MHURA believes truth, transparency and Accountability for decisions made that cost YOU, the taxpayer and rate-payer, money is of the utmost importance. Too often decisions made by Council seem to be more of a “back room” nature, and when the city does actually hold “Open Houses” they are felt to be more of a “sales pitch” than being informative and responsive. Time and again, the City employees that are placed in these sessions don’t have real knowledge and can’t answer real questions.

The City of Medicine Hat, the only municipality in Alberta, has an exemption from the Alberta Utilities Commission (AUC) regarding legislation or oversight, etc., as long as the city stays within the allowable production and distribution limits as determined by the AUC.

As the City of Medicine Hat considers transitioning its energy division to a Municipally Controlled Corporation (MCC), MHURA urges citizens and council to carefully weigh the long-term impacts.

Below are several critical concerns ratepayers should be aware of before any decision is made.

1. Governance & Public Oversight
● City’s Claim: MCC will include safeguards like a council-appointed board and a rate review committee.
● The Concern: Will these safeguards be legally binding and enforceable? Will Council retain real authority over rates and operations?
● MHURA’s View is that we demand clear and binding commitments on board transparency, public reporting, and Council’s override powers.
A) what would shareholder’s agreement look like? Will it be publicly accessible? What Pierre would it grant or restrict?
B) ● What mechanisms exist for the public to provide input or challenge decisions made by the MCC? Will any MCC board meetings or reports be accessible to ratepayers?

2. Profit vs. Public Interest
● City’s Claim: MCC will increase long-term profitability and keep prices low.
● The Concern: Other MCCs like ENMAX and EPCOR have prioritized profits over affordability.
● MHURA’s View: Ask how affordability—not just profitability—will be protected. Where will profits go?

3. Arm’s-Length Management
● City’s Claim: A corporate model reduces Council’s workload and improves decision-making.
● The Concern: This distances decision-making from public accountability.
● MHURA’s View: Any movement should strengthen internal city governance with expert advisors—don’t outsource responsibility.

4. Rate-Setting Power
● City’s Claim: Rates will be reviewed by an independent committee.
● The Concern: The MCC still proposes rate changes, creating room for bias.
● MHURA’s View:
A) Who selects this committee? Are they independent?
B) What’s the public’s recourse if rates spike?
● C) Will the rate review committee consist of salaried city employees?
D) If so, will they receive extra compensation, and how will potential conflicts of interest be managed?

5. Costs to Establish and Operate
● City’s Claim: Setup will cost $4M, with ongoing $2M/year.
● The Concern: This is significant for taxpayers and ratepayers already struggling with affordability.
● MHURA’s View: Request a full business case and cost-benefit analysis specific to ratepayer impacts.

6. Market Volatility
● City’s Claim: MCC will profit from exports on the Alberta grid.
● The Concern: Alberta’s energy market is volatile and unpredictable.
● MHURA’s View: Show the risk models. What happens if export prices crash or regulations change?

7. Redundancy of Purpose
● City’s Claim: MCC is needed due to rising regulatory complexity.
● The Concern: Could internal reforms within City Hall solve the same issues without losing accountability?
● MHURA’s View: Why overhaul when upgrades to current governance may suffice at lower cost?

8. Transparency of External Consulting
● City’s Claim: KPMG provided expert third-party advice to guide MCC planning.
● The Concern: The full cost of consulting services has not been disclosed.
● MHURA’s View: How much has the City paid KPMG to date? What is the final anticipated cost, and how long will they be retained? Taxpayers deserve transparency when consultants help reshape public institutions.

9. Revenue Obsession vs. Fiscal Discipline
● City’s Claim: The MCC will generate increased revenues for the City, benefiting all ratepayers.
● The Concern: The City has focused heavily on generating new revenue while continuing to raise taxes and utility rates above inflation—without addressing its own high discretionary spending.
● MHURA’s View: Why is revenue generation prioritized over spending restraint? If the MCC is profitable, will Council commit to using all surplus revenues to reduce taxes and utility bills for residents? Fiscal discipline must be part of the solution.