Council considers electricity purchase

July 13, 2001

Council considers electricity purchase
Deregulation serves as a motivator

Kyra Hoggan

Airdrie city council is looking at a deal that could ultimately bank the city as much as $1 million per year.

Electricity deregulation sparked the fuse that lit a fire under council to take advantage of the Municipal Gov-ernment Act, an act which allows a city the right to purchase a local electricity distribution system if a franchise agreement isn't already in place.

Mayor Dan Oneil said that since Airdrie has no such agreement, now is the time to consider making a deal.

"We are working with Enmax to look at buying our electrical distribution system from Utilicorp, who bought it from TransAlta just over a year ago," Oneil said. "We thought this was an opportune time to look at buying the wires."

The deal will mean that the profit from this segment of local utility bills will remain in the city rather than going to Utilicorp, which Oneil said will allow council to cushion some of the negative effects of deregulation.

"It won't put us in a position to insulate people entirely," he said. "But it does put us in a position to control costs associated with local distribution and ... the tariffs charged because of it."

There are three different components to an electricity bill: the generation costs (which Oneil said are the primary issue in high bill amounts), transmission and local distribution.

While owning the system would only put the city in control of one of those arenas, the profit potential remains high.

Oneil said that, based on the negotiations already underway with Utilicorp, he estimates a significant return.

"Their (Utilicorp's) profit would be somewhere between $600,000 and $1 million per year," he said. "But that's just a broad estimate."

The problem now is the two parties' inability to reach an agreement on price, which may force them to bring the negotiations to the Energy Utility Board (EUB), a provincial body which would serve as arbitrator and set a price that both the city and Utilicorp would have to honour. Enmax is involved only on a consultant basis, offering regulatory and technical information to assist in the purchase process, although there is the potential that they would end up the contractors handling the distribution system on the city's behalf.

Oneil said that despite their inability to reach an agreement there is no enmity between the negotiating groups.

"To this point, we certainly are not in a major row," he said. "Our relationship has always been quite civil and I don't expect that to change."

And while Oneil said that approaching the EUB is the next logical step in the process, no decisions will be made until a price is set and council has had an opportunity to determine if said price is feasible for the city. Oneil added that there are advantages to the city beyond the monetary potentials.

"It's a move toward independence and it would give us unfettered access to the right-of-ways now owned by Utilicorp," he said, adding that owning the system may give the city more distribution options as technologies grow, an important factor in adapting as a self-described 'technologically friendly' municipality.

Such major centres as Calgary, Edmonton and Lethbridge already own their own electricity distribution systems.