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February 10th, 2016 ~ Vol. 85 No. 6
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Municipality considers selling electrical utility to Fortis
Crowsnest Pass Herald Front Page
Stock photo
EZRA BLACK
Pass Herald Reporter
Staring a huge capital investment in the face, council is considering selling the municipally owned electrical distribution system to electricity utility FortisAlberta.

During an in-camera session on Feb. 2, council took the first step in considering the sale after Fortis undertook a review of the municipal utility system, at council’s request.

In a statement, the municipality said the assessment found the community’s electricity infrastructure needs substantial upgrades.

“In light of the recommended upgrades and the financial investment required to complete these upgrades, council is considering the opportunity to sell the current system assets to FortisAlberta,” said the municipality in a statement. “It has requested that FortisAlberta present to council a formal offer to purchase the system assets.”

The statement said no final decision on the sale had been made and that council would engage in a community consultation process before proceeding. CAO Sheldon Steinke said he’s scheduling the first of several possible open houses.

The municipality owns and operates about 20 per cent of the total electricity infrastructure in the Pass. Fortis owns the other 80 per cent and serves about 60 per cent of the community’s electricity customers.

The statement outlines three benefits the sale would have for the municipality: First, Fortis would be responsible for the improvements to the community’s electrical infrastructure. Second, the municipality would receive a sum of money that it could reinvest elsewhere in the community and third, the municipality would be relieved of the legal and regulatory responsibility that comes with operating a utility.
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However, the community would be forfeiting the long-term revenue it collects through ownership of the utility.

According to audited financial documents, the municipality brought in $70,000 in utility fees in 2015. Such fees would be lost if the sale goes through.

That same year Fortis paid the municipality $400,000 in franchise fees for right to operate transmission lines and towers in the community. Those fees would increase if Fortis buys the rest of the Pass’ electrical infrastructure.

In an email interview, CAO Sheldon Steinke said Fortis is recommending system upgrades worth $1.5 to $2 million in capital. It would be unplanned spending, not included in the municipality’s 10-year Capital Plan.

Like putting a bigger battery in a car to reduce the chance ones interior lights flicker when turning the ignition, the upgrades would increase the power of the electrical distribution system from 4,160 volts to 25,000 volts. This would improve the quality of power delivered to customers, said Steinke.

Fortis also recommended construction and repairs to bring the infrastructure up to industry standards.

The Pass, Fort Macleod, Panoka and Cardston are the only other Southern Albertan communities that currently own their electrical distribution systems.

Jeff Shaw, Cardston’s CAO, said Cardston owns the electrical infrastructure inside the municipality while Fortis services a nearby Blood reserve and surrounding areas.
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Shaw’s municipality had also considered selling their electrical distribution system to Fortis.
“We talked to Fortis back in 2011,” he said. “We had the conversation to at least explore it. In the end council chose not to…The return on investment from the proceeds of the sale and the return on the investment we were getting from our system were very similar.”

“There wasn’t a strong enough financial case for council to really jump on board with the sale… At the time our council was very divided,” he said. “It was not taken lightly.”

Shaw said Cardston has been reinvesting all the profits it makes from utility fees back into the community’s electricity infrastructure.

“All of our councils choose to prioritize investment differently,” he said. “We’re aggressively upgrading our system right now. We’re taking all the profits and reinvesting to upgrade the system but when that diversion is done we’ll have a healthy profit margin.”

In the Pass’ case, Shaw said the Alberta Utilities Commission would look over any offer made by Fortis to determine if it were reasonable and give some assurance that the community would receive fair market value.
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February 10th ~ Vol. 85 No. 6
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