April 20th, 2016 ~ Vol. 85 No. 16
Utility sale to Fortis update
Crowsnest Pass Herald Front Page
Archive photo
Pass Herald Reporter
On April 13 at Blairmore’s Elks Hall, the municipality held a second open house on the possible sale of the community owned electrical distribution system to FortisAlberta.

If there were a sale, the municipality would receive an annual increase of its total net revenue of about $240,000, which is about 2.4 per cent of the total revenue that the municipality pulls in annually.

If it were kept, the electrical distribution system would make $514,443 for the community in 2017 compared to $747,392 if it is sold.

Selling would also free up about $900,000 that had been previously saved to make upgrades to the municipal system.

Council invited Fortis to conduct an assessment of the municipal electricity distribution system last August.

The assessment concluded that $1.5 to $2 million in upgrades would be required to bring the system up to industry standards and increase the power of the electrical distribution system from 4,160 volts to 25,000 volts.
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The municipality owns the 20 per cent of the community’s power lines serving West Coleman, East Blairmore and parts of Frank, and serves about 40 per cent of its customers. Fortis owns the rest.

The power company has offered $3.7 million to purchase the municipality’s system. The offer price is based on a formula provided by the Alberta Utilities Commission (AUC).

Mike Pashak, Fortis’s vice president of Customer Service, said his company would benefit from the sale through cost efficiencies.

“We’ve got huge economies of scale,” he said. “As we add more customers, it costs less to operate per customer.”

Municipal electricity bills would not be greatly affected, he said, because Fortis’s and municipal rates are similar and all provincial electricity rates are regulated by the AUC.

CAO Sheldon Steinke declined to give his opinion on whether or not the municipality should sell the system.

“I don’t want to go there,” he said. “I’m the administrator. I want to make sure the ratepayers that have questions get reasonable answers to help them make a decision.”

The Pass is one of only four Albertan communities to own its electricity distribution system, the other three being Ponoka, Cardston and Fort MacLeod.
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In 2011, Cardston had also considered selling their electrical distribution system to Fortis but in the end their council chose not to.

“We had the conversation to at least explore it,” said Jeff Shaw, Cardston’s CAO.

Shaw said that deciding factor in Cardston’s decision was that return on investment from the sale and the return on the investment they were getting from their 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,” said Shaw. “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.”

Shaw said the overall revenue of Cardston’s electrical department is well over $700,000 but its net profit is well under that sum. Shaw cautioned against comparing the Pass’s and Cardston’s systems.

“An apples to apples comparison is difficult between municipalities as the use of proceeds, staffing, capital expenses, rates and fees are different between both,” he said.
April 20th ~ Vol. 85 No. 16
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