Tuesday, 21 October 2014

City Business - Purchasing EPCOR Water Utility


It is my personal belief that the City of White Rock should purchase the water utility presently owned by the Edmonton Power Corporation (EPCOR)

Ever since its inception in the early 1900's the White Rock Water Utility has been privately owned.  As a private utility it is regulated by the Province's Comptroller of Water Rights.  The Comptroller assess the financial performance of the utility and provides some limited oversight on its operation..  The quality of the water the utility distributes is monitored by Fraser Health.

EPCOR purchased the utility about eight years ago, and proceeded to operate it much more professionally than it has ever been run in the past, and with an eye to making the necessary system improvements and upgrades.

Nonetheless, a few years ago there was a system-wide "boil water" order imposed by Fraser Health in response to a positive test for coliform in the water.   Subsequently, Fraser Health ordered EPCOR to take steps to chlorinate the water, which has never been chlorinated in the past. 

In compliance with the order, EPCOR undertook a complete study of the system and came up with what they called the Total Water Quality Management Plan (TWQMP).  This plan provided for not only chlorination, but also infrastructure upgrades such as replacement of the reservoirs, as well as arsenic and manganese removal.  The total cost of this program was estimated to be in the order of $12 million.

City staff were asked by myself to review the proposal to see  what the effect on the taxpayers would be.  Their findings are summarized as follows:
  • EPCOR currently borrows at a rate of between 5% and 7%.
  • The City can borrow at a rate of between 3 and 4%
  • EPCOR cannot get senior government grants for the work, but the City is eligible for these grants.
  • EPCOR currently sends about $250,000 annually (as profit) from White Rock to the City of Edmonton.  Once the TWQMP is complete they will be sending in excess of $1 million annually to Edmonton.
  • EPCOR is guaranteed a 10.5% rate of return on investment by the Province.  Since they borrow at a considerably lower rate, they are in the position that the more they borrow, the greater their return (profit). All principal and interest on the borrowed money is paid by the City residents and businesses.
In consideration of the foregoing, it is obviously in the best interests of the taxpayers that the City acquire the utility from EPCOR.

EPCOR is very competent operator and it is mostly likely that they would be retained to operate the system for a period of time until the City is able to fully assume its management.  It is also likely that the City would offer employment to the EPCOR employees once it does take on full management of the utility so that the service level to the taxpayers would be consistent.
  
City Staff are presently negotiating a final price with EPCOR and expect to have that negotiation concluded in the Spring of 2015.  Once the purchase is complete, all the distribution system, the wells, the treatment facilities, the land and the buildings of EPCOR would belong to the City.

As an aside, one of the candidates for Council is spreading a rumour that once the City buys EPCOR out, it will develop the EPCOR works yard at the corner of Oxford and Buena Vista as a high rise building site.  That has to be one of the most ridiculous suggestions I have ever heard.  I can assure you that there is no such plan and as long as I am in office, that is not even a topic for discussion.    



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