74 Ryerson Place West,
Lethbridge, Alberta
T1K 4P5

December 18, 2000

Clint Dunford:

The purpose of this letter is to dispel some rumours and to try to communicate some realities to you and the rest of the cabinet. I hope you will share the information because it seems that there is a high level of paranoia among some of the senior members of the inner circle.

1. The Industrial Association of Southern Alberta is not funded by the Liberals. In fact, we have received nothing from the Liberals and we are somewhat disappointed with their efforts in criticizing the government on the issue of electrical de-regulation since the legislature was adjourned. We have regular membership dues and for this issue we levied a special assessment of one quarter of one percent of each members' annual electrical cost, prior to the effects of deregulation. We have received the unsolicited moral and financial support of eight other organizations, representing a range of consumer interests, none of which was the Alberta Liberal party.
2. Our government is still not addressing the key issues of deregulation which are
   1. The inappropriate use of market power in the powerpool (MSA Report, Oct 13, 2000)
   2. The inappropriate behaviour of powerpool participants (MSA Report, Oct 13, 2000)
   3. The shortage of electrical generation (every credible industry source, this excludes DRD)
   4. The lack of competition in the existing market place (evidence abounds, call for details)
   5. The deliberate actions of EPCOR and ENMAX to control pricing and limit competition
3. Our government is failing to fix the real problems with Electrical deregulation and is wasting money applying short-term band-aids to defer the problem in to the future. This money will not be recoverable and is currently being squandered when it could be used to fund solutions.
4. Our government is in denial. There are claims by our government as recently as Dec 16th that electrical rates are going up in neighbouring provinces. Oh really ? Exactly where ?
5. There is a lack of understanding of the impact of this on industry and business. Or, you tell me Clint, is it that you just don't care? Do you care that our electrical rates will be triple those of our competitors and sisters plants? Do you care that the delivered price will increase from 5 cents per kwh last year to 15 to 20 cents this year? I can tell you that our International Senior Vice President of Operations cares. And he is very interested. We will soon lose significant contracted production volumes for our former owners because it now no longer makes business sense to produce them in Lethbridge.
6. We learned that more than 200 businesses in Lethbridge do not qualify for the regulated rate option (RRO) and were unaware that they had to choose a retailer. Can you imagine how many businesses that must be in all of Alberta? How fair is it when one restaurant will be faced with a bill of 20 cents per kwh (default rate 16 cents plus Distribution and Transportation plus MCAF) while their slightly smaller competitor qualifies for the much lower Regulated Rate Option. Similar examples exist across all businesses sectors.
7. We have heard rumours that our government will increase the regulated rate option to 11 cents and increase the subsidy to RRO customers. Another 1.8 cents may be forthcoming to Industrial customers. This would be another disastrous pronouncement, again deferring the problem rather than fixing it and squandering the proceeds of the latest MAP auction, in effect to the retailers. Most Albertans are puzzled as to why ENMAX and EPCOR would deserve so much financial support. Exactly what is their contribution to the Alberta economy? They appear to function more like a source of revenue for Alberta's two largest cities to the detriment of the rest of Alberta. Think about this before another catastrophic error is made which can not be reversed.
8. Electrical deregulation in Alberta is genuinely flawed. We had asked for the problem to be fixed. That has not been done despite assurances that it would be. Is this government prepared to relieve Albertans of the cost of electrical deregulation or not ? If not, you will be the authors of your own misfortune. We have been trying to communicate the deficiencies of this process for months without success. Now our government realizes the enormity of the problem, it will not accept responsibility for it and appears prepared to sacrifice the interests of many Albertans in order to avoid doing so.
9. Given our government's lack of commitment to fixing the problem, you can reasonably anticipate a renewal of public challenges to Premier Klein and others who are responsible for the current state of affairs. Individual M.L.A.s can expect to be challenged by their constituents as to whether they are supportive of this government's record on electrical deregulation.
10. Our government created this problem and they should fund the solution. If you aren't prepared to do that, Albertans will consider that when deciding your future, as individuals and as a government. That is not a political bias. It is a reflection of how you have served the interests of Albertans. As a past supporter, I am deeply disappointed in this government's ability to deal with this problem. You have not been receptive to my concerns and have not dealt on a timely basis with the issues raised. Some letters still await responses and most issues remain unsolved. As it relates to Electrical Deregulation, why would anyone have confidence in this government when it is apparent that you do not know what you are doing ?

Electrical Deregulation has proved to be expensive in Alberta and in most other jurisdictions. It's time for a careful re-assessment of the cost involving the real stakeholders - the customers.

It's time to stop wallowing in paranoia. Our concerns are genuine. As one example, a major international food processing plant in Lethbridge deferred a $25 million expansion decision last week as a direct result of electrical deregulation and the parent company is now seriously considering another plant and location. Are you happy about that Clint ?

Similar decisions, including production volume reductions and plant closures are being contemplated because many do not have confidence that our government is prepared to fix this problem. We are expecting more vote-buying and catering to the retailers in today's announcements.

I would strongly suggest that you , Mr. Klein, Mr.West and Mr. Cardinal read the report of your own Market Surveillance Administrator starting on page 14 in the section that deals with market power and the behaviour of the market participants. Compare these comments to the recent articles from the New York Times. We have the data Clint. John sent some with his second letter to Mr. Klein. The behaviour described is happening here and our government is allowing it to happen. You have had this report for two months. Please Do something with it !

None of this should be a surprise to you Clint. You were our first contact in early September. I wrote you a personal letter on October 12th outlining many of the same things I said at the seniors forum on November 24th. By that date we had had several more communications with the Resource Development Department and the government itself, none of which indicated that anyone understood the enormity of this problem.

Now it appears that we will add to the "obscene profits" of the retailers, EPCOR and ENMAX, who throughout this process have taken numerous actions to limit competition. If this occurs Albertans will be subsidizing the cities of Calgary and Edmonton and we will do our best to make sure that they know it.

As I mentioned to you on November 3rd, when it was introduced, the 10-Point Plan has no completion dates for any of the identified goals. Will we ever know when this government intends to complete this process?

We put in abeyance our challenge to debate Mr. Klein and Mr. West on provincial television on this issue on the condition that you would fix the problem. You have not done so and it is apparent that this government has no intention of doing so.

You have the ability to influence the outcome. Please do your best to ensure that any solutions address the problems and are not just vote-buying tactics. If you choose not to do that, you will be the authors of your own misfortunes, and deservedly so.

Best wishes

Chris Spearman

Bus 317- 2115

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