Electricity rate battle looms

August 13, 2002

Electricity rate battle looms
Alberta challenges municipal control

Grady Semmens

The province has set the stage to take control of electricity rates away from Alberta cities in a decision some say could result in lower power bills for customers.

The ruling also paves the way to a political maelstrom as fuming City of Calgary officials say they're going to fight it from becoming law and potentially wreaking havoc with the city's budget, which relies on regular injections of cash from Enmax.

"They're heading into a major political issue with us. I hope they know that," said Ald. Dale Hodges, a member of the Enmax board and chairman of the city's gas, power and telecommunications committee.

Although the province denies it, Hodges says the decision smacks of an underlying motive of forcing municipalities out of the electricity business.

"This seems to be running in a parallel line to that," he said Monday. "I'm certainly not surprised they've taken this position."

Calgary-Mountain View MLA Mark Hlady, chairman of the legislature's committee on energy and sustainable development, confirmed Monday the provincial cabinet and Conservative caucus have endorsed his committee's controversial recommendation.

It gives the Alberta Energy and Utilities Board jurisidiction over rates charged by municipally owned power companies, including Enmax and Epcor, owned by the City of Calgary and City of Edmonton, respectively.

Hlady said the change is intended to "level the playing field" between private power companies, which are already subject to AEUB-set rates, and publicly owned corporations whose rates are determined by municipal councils.

"When one group is not playing by the same rules, it doesn't allow for effective competition," said Hlady, who added he anticipates a backlash from some civic politicians.

"I'm sure the City of Edmonton and the City of Calgary aren't that happy about it because they've had a monopoly on the marketplace," he said.

"We're working on trying to get people the lowest prices in the competitive marketplace. No new players from anywhere in the world will come into this marketplace if they can't compete on a level playing field."

Premier Ralph Klein said he's wholeheartedly in favour of the plan to take control of electricity rates away from municipally owned power companies such as Epcor and Enmax.

"The argument was made in a recent meeting I had with Epcor that the city is simply a shareholder, that the city really doesn't own Epcor -- they're simply a shareholder like any other shareholder," Klein said.

"Using that argument, and the fact that Epcor and Enmax are becoming more arm's-length from the municipalities, we feel that they should be subject to the same rules and regulations, vis-a-vis setting rates, that other companies like Atco and TransAlta are."

Klein said the change would mean that when a electricity rate increase was requested, it would be decided on by the Alberta Energy and Utilities Board instead of by municipal councils.

The decision is being praised by private power companies, which have been lobbying for such a change for months.

"We're pleased. It alleviates the wrinkle of having two sets of regulators in the province," said Evan Bahry, executive director of the Independent Power Producers Society of Alberta, representing 185 corporations involved in the electricity sector.

"It's a good-news story for a level playing field and creating a transparent and uniform regulatory regime," Bahry said.

News of Hlady's recommendation caught city officials off guard, as Hodges said Mayor Dave Bronconnier has been trying to find out the decisions of the provincial committee's last meeting on July 25.

Bronconnier could not be reached for comment Monday.

If approved in the legislature next spring, Hodges said, such a change may cost Calgary taxpayers millions in lost revenue since the city normally relies on about $70 million a year in returns from Enmax.

"We're not sure how the AEUB may want to change rates when they review them, but one of our concerns is it will lead to a dramatic change in what Enmax pays us in terms of our return on investment," said Hodges, referring to the "municipal consent and access fee" the city charges Enmax.

"The problem could be that if they endeavour to leverage the rates down in 2003, the return the city gets from Enmax in lieu of property tax could go down. Should that happen, we're going to be in a revenue-shortfall situation," he said.

The issue is reigniting the controversy over whether Enmax should continue to be owned by the city and be faced with the conundrum expressed by Hodges.

City council voted in May to retain control of the electricity company after a six-month public review process.

"I'm not in favour of the province taking a big-brother attitude towards the city, but I have long been on the record and still agree now that the city is in a conflict of interest by owning a utility and regulating it," said Ald. Ric McIver, one of two aldermen who voted to divest Enmax.

"Saying we are watching ourselves closely to make sure we don't charge too much -- what kind of nonsense is that?" McIver said. "I'm really disappointed the cities didn't have the sense of fair play to do this on their own."

Although there is no significant difference between AEUB-dictated rates and those set for Enmax, Bahry said the change is desirable as a matter of due process.

"The city should also appreciate the conflict that they're in," he said. "Where do their interests lie? Is it in raising the rates to increase revenue for Enmax or is it to keep rates low for consumers, who they also represent?"