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Referendum planned on sale of Town of Fort Macleod’s electrical utility to Fortis

Fort Macleod council last week accepted a $4.77-million offer from Fortis Alberta Inc. to buy the town’s electrical utility.
That decision will be finalized by the next council following a referendum in conjunction with the Oct. 16 municipal election.
When Fort Macleod residents choose their council candidates, they will also be asked to give a yes or no answer to the question, “Are you in favour of the Town of Fort Macleod selling the town’s electrical utility system to Fortis Alberta Inc.?”
Three public information sessions would be held prior to the referendum to educate the voters on the decision they will help make.
The referendum result is not binding but will provide council with direction on the issue.
Fort Macleod, Cardston and Ponoka are the only municipalities of their size to own an electrical utility.
Cardston and Ponoka, like Fort Macleod, had Fortis assess their electrical systems.
That assessment showed Fort Macleod’s electrical utility is depreciated and in need of a large amount of capital improvements.
Town of Fort Macleod operations manager Justin MacPherson presented a report to council at its June 26 meeting at Fort Macleod Library.
“Administration believes that the risks of owning and operating an electrical utility, especially one as old as Fort Macleod’s far outweight any perceived benefits of owning and operating it,” MacPherson wrote in his report.
“Fortis Alberta Inc. would operate the electrical utility in a prudent and businesslike manner and the residents of Fort Macleod would receive electrical services as they aways have, but the service would be stable and secure as Fortis Alberta Inc. has the business knowledge and the capital to perform the necessary upgrades to the system in a timely and cost-effective manner.”
In his written report MacPherson listed the following as reasons to retain the electrical utility:
• Control over staffing and direct communication with staff.
• Control over where and when money is spent on upgrades.
• Street lighting would cost about $130,000 a year if Fortis owned the distribution system.
• The electrical utility is a Town of Fort Macleod asset.
• The Town of Fort Macleod would have limited control over rate increases with Alberta Utilities Commission approvals.
• Council can recover the capital dollars spent by increasing rates. For example, the town spent $388,000 in 2016 which, in theory, could have been a 25 to 30 per cent rate increase for residents for 2017.
As reasons for selling the electrical utility, MacPherson listed the following:

    • The utility has been underfunded and depreciated for 50 years and is a financial liability and burden for taxpayers.
    • Electrical utility revenue in past has been used to subsidize municipal tax rates instead of upgrading the system. At least five years of “aggressive” capital spending would be needed to upgrade the system.
    • Growth of the system is dependent on growth of the town.
    • Operational expenses will increase two to three per cent a year at the same time revenue is forecast to drop by one per cent, unless the town increases rates.
    • Equipment costs continue to rise.
    • The Town of Fort Macleod would benefit from the Fortis Alberta street light programs which incudes a $2,937 investment for each new streetlight, regular light pole assessment, maintenance and repairs.
    • The Town of Fort Macleod could charge Fortis an annual franchise fee beginning at $318,078 and increasing two per cent a year that would provide consistent revenue. At present electrical revenue is volatile, making it hard to budget.

An analysis showed revenue of $2,028,000 against expenses of $2,101,420 for a deficit of $73,420 in 2018 if the Town of Fort Macleod operates the system.
That deficit increases to $370,183 by 2022, creating a total deficit of $1,145,865 over five years.
When capital spending to upgrade the system is included, the deficit in 2018 climbs to $151,420.
By 2022 the annual deficit rises to $510,637, or a total of $1,957,019 in that five-year period.
Council also learned Fortis will hire the town’s electrical staff and they will not have to relocate.
“We need to know from council how you would like to proceed, given the election is three months away,” chief administrative officer Sue Keenan said at the June 26 meeting.
Coun. Gord Wolstenholme said people in Fort Macleod have strong opinions for both selling and retaining the utility.
“That’s why this is one thing I think should go to a referendum,” Wolstenholme said.
Council voted 6-1 in favour of Mayor Rene Gendre’s motion to sell the electrical utility to Fortis and hold a referendum, with Coun. Keith Trowbridge casting the lone opposing vote.