Utilities Privatization
by Jane Harris
Epcor’s restructuring of its power generation assets into publicly traded Capital Power Corp. this summer sparked debate in Edmonton. Since then, the closed-door proceedings that led to Canada’s biggest IPO since 2007 have caused another Alberta community to question the value of privatization.
In September, Medicine Hat city council voted five to three to reject the Ernst & Young report it commissioned that recommended the running of the city-owned and -operated oil and gas production business (dubbed Prodco by report writers) be handled by a paid board of directors. Even with the city set to be the only shareholder in the independent company, public skepticism scuttled the deal.
The decision to maintain the status quo was largely the result of public hearings in which citizens questioned whether changes would benefit them as taxpayers. As a division of municipal operations, the profitable, century-old business is currently exempt from provincial taxes and royalties. It also saves on costs by sharing city administration and offices. If the shift were ever to happen, says Alderman Ty Schneider, who voted against privatization, “Taxes would have to go up to cover this.”
That Capital Power was created without open consultation had many citizens convinced of a worst-case scenario playing out in Medicine Hat, suggests Schneider. “Their concern is you lose control, similar to what happened to Epcor,” he says.
Leading up to the decision, Ricardo Acuña, executive director of public policy think-tank the Parkland Institute, backed that concern. “Prodco would operate entirely at arm’s length with complete authority to make… decisions about its operations,” he said. “City council would have no say whatsoever in those decisions.”
Given the choice Edmontonians never had, “Our citizens strongly believe in the public ownership of our utilities,” says Alderman Graham Kelly, who also voted against the proposal. “Woe to any city council that tried to mess with that.”
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