May 16, 2002

ATCO boss: Local taxes a barrier to competitive electrical industry

CALGARY (CP)

Potential competitors are shying away from Alberta's deregulated power market because they don't want to compete against municipally owned utilities that pay less taxes, energy company Atco Ltd. said Wednesday.

Atco, which has large power production and utility operations, has been trying to sell its retail electricity and gas businesses for more than a year.

"The problem is, there isn't a level playing field so there's no incentive for other companies to come into the marketplace at this time," Chief executive Nancy Southern said following the Calgary company's annual meeting Wednesday.

Southern said while there has been plenty of interest in Atco's retail divisions, the final sticker price will depend on the Alberta government.

Specifically, she said municipally owned utilities don't pay tax on the regulated rate for energy and on the distribution system inside their municipalities.

"It's a bit ironic that in this province, people wouldn't buy gas for their car from a government-owned oil company but everybody's buying their energy from government-owned utilities," said Southern.

She said the problem does not exist in Ontario, where all companies are fully taxed regardless of whether they are publicly traded or owned privately.

Charlotte Moran, a spokeswoman for Alberta Energy, said Wednesday that he office was looking into the claims.

One of the largest and fastest growing municipallyowned utilities in Alberta is Epcor, which is wholly owned by the City of Edmonton.

Epcor has recently started a big push into Ontario, where it now has about 1.3 million customers. IN a recent deal, Epcor's Union Energy subsidiary picked up 400,000 electricity customers from Hydro One, Ontario's power distribution entity.

Epcor vociferously dined that it has substantial tax advantages.

Chief financial officer Mark Wiltzen said Epcor pays regular rates outside of Edmonton and within the city it is now required to pay fees in lieu of income taxes - a sum it says amounts to the same rates as other companies.

"In my view it's not fair to suggest that (Atco) being unable to sell their retail is because of our tax situation," Wiltzen said from Edmonton.

"From our perspective, on our competitive businesses the playing field is level and what we compete against is Atco on is level."

Atco and Epcor are tow emerging, Alberta-based energy companies that are using the Prairie province's deregulated market as a launching pad for the newly privatized marketplace in Ontario.

Epcor also recently announced plans to take a 50 per cent stake on a new, $400-million power plant being built in Sarnia, Ont., by Calgary-based TransAlta.

Meanwhile, Atco is currently awaiting environmental approval on a large, 450-megawatt gas- fired electricity plant for Windsor, Ont.

Copyright 2002 The Lethbridge Herald