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EPCOR demanding huge increase of 68 per cent to fee structure

Posted on June 22, 2016 by Taber Times

By Trevor Busch
Taber Times
tbusch@tabertimes.com

With EPCOR dropping a rate increase bombshell on the municipality in late 2015, the Town of Taber is now weighing options that could include the termination of the present contract with the utility operator.

At the Nov. 9, 2015 regular meeting of council, EPCOR discussed the terms of its current contract with the town, which covers the town’s water and sanitary sewage systems as well as portions of the town’s storm water system. The contract also includes a debt repayment schedule related to the town’s sanitary sewage treatment (biological nutrient removal) plant, which EPCOR funded. At the time, EPCOR proposed an increase of $1.3 million annually, amounting to a 68 per cent increase to its current fee structure. Council directed administration to discuss the proposal in terms of the options allowed within the current contract, while also investigating alternative solutions to the issues raised by EPCOR.

“At this time, I think we’ve reached an impasse, and there are essentially three options in front of the town, and council,” said CAO Greg Birch, speaking at town council’s June 13 regular meeting. “The agreement that we have with them says that there’s a one-year period to essentially exit. So if this was approved, then council would start to negotiate with EPCOR for withdrawal. Not sure where that would end up, but there would be transition between them operating it, the town operating it, and/or us taking it and awarding a contract to somebody else, another third party provider. There aren’t that many competitors to EPCOR, but there are some.”

According to administration, the town now has three options which are accepting EPCOR’s 68 per cent ($1.3 million) fee increase; taking over operation and maintenance of water distribution and sanitary collection pipelines, in which case the EPCOR fee increase would be 46 per cent ($900,000); or the town and EPCOR could begin negotiations to terminate the contract in a year’s time, with the town either setting up its own department to undertake the task or contracting it out to another company.

Coun. Laura Ross-Giroux questioned finance director Devin Wannop about the financial liabilities to EPCOR that would exist on the part of the town involving a previous capital project (sanitary sewage treatment plant), should the town choose to terminate its contract with the utility provider.

“I believe our total figure is right around $7.5 million for our principle, and then about $2 million for our interest that we owe until the end of the term,” said Wannop. “The principle amount we could definitely get re-loaned, even at a smaller interest rate, because right now it’s at 6.5 per cent, and we could get it at easily 3.5 per cent. The interest portion is what would be up for debate, for sure — if they’re getting out of the agreement themselves, why would we pay for that additional interest amount when we weren’t the ones that initiated the termination.”

According to administration, EPCOR wants to substantially increase the amount the town pays for service, which would have a corresponding impact on the town’s utility fees (the town establishes its utility fees to be close to break-even with costs) and could also adversely affect the town’s ability to compete for new business opportunities and residential growth.

Through a contracted study, MPE Engineering will provide some of the costs that the town would assume with the return of distribution and collection pipelines, as well as costs for operating and maintenance of all treatment facilities, including costs of applicable chemical feed systems, and in general providing council with more accurate budgetary costs and help with their decision.

“I have a problem with a study for $17,000 in order to allocate costs, of what it would cost to run the water treatment plant, and sewage treatment. Why would we need to do a study on that?” questioned Coun. Joe Strojwas.
Public works director Gary Scherer indicated that hard numbers would be preferable to loose guesswork.“It’s basically to verify our numbers, so that we can come to council and say yes, these are the numbers that we’re proposing. They are verified. Some of the costs we don’t know. I don’t know the chemical costs, and they work with many municipalities with chemicals. Maintenance costs.”

Wannop pointed out that EPCOR doesn’t provide the Town of Taber with a detailed breakdown of costs on a monthly, or annual, basis.

“There’s no breakdown of what salaries would cost, what margin they made, what chemicals cost — none of that is included, it’s just that flat fee that was negotiated.”

Strojwas continued to pressure for an alternative solution, including the possibility of consulting other municipalities for their costs.

“Every municipality is different,” said Scherer. “There’s a lot of different variables, and we don’t want to try to compare apples to oranges and bring different numbers to council. We want to make sure we’re all in line.”

For the minimal cost involved to commission a study, Mayor DeVlieger considered it money well spent.

“I think for the magnitude of the issue that we have, I think it’s money well spent. It’s hard to compare so many different systems out there — apples and oranges — we’re in an impasse here where we need to shortly make a decision. Accepting a $1.3 million increase, that would have to be passed on the taxpayer — to me that’s unacceptable. Or a different route, there may be a few different options that administration would have to look at. I think this $17,000 is well spent, because if we have to make a decision, I like to make it on facts, and then later all the sudden having another white elephant sitting there that’s going to cost us way more money that we anticipated.”

While in alignment with DeVlieger’s viewpoint on the issue, Coun. Randy Sparks also reserved some scathing criticism for EPCOR’s contract demands in negotiations.

“I agree it’s money well spent, because unfortunately the town has been backed into a corner by EPCOR. When a company like EPCOR can come and say we’re increasing your rates by 68 per cent, that’s absolutely ludicrous. So the town is in the situation where we have to find some other options. I believe this $17,500 is money well spent to make sure that we have the information that we need to make the best possible choice that we can make. This isn’t going to be an easy decision. I’m very disappointed in EPCOR and what they’re trying to pull with the Town of Taber.”

In early 2016, CAO Greg Birch was contacted by EPCOR with a proposal for discussion with the town, involving an investigation into the viability of EPCOR and the town forming a utility corporation, with EPCOR purchasing parts of the town’s water and wastewater treatment infrastructure. At the time, EPCOR had suggested that this may eliminate the need for a 68 per cent increase, while providing revenue to help the town pay for capital projects. However, this was later determined by EPCOR to be a non-viable option, which has returned to its original proposal.

At their June 13 meeting, town council voted unanimously (6-0) to direct administration to evaluate the three options available to the Town of Taber for future operation and maintenance of the town’s water, wastewater and storm sewer system, given EPCOR’s request that annual fees be dramatically increased if EPCOR is to continue to provide service; and directed administration to contract MPE Engineering for the development of a water and wastewater operation study to assist with this evaluation, with an upset cost of $17,500 to be funded from operating reserves. Coun. Jack Brewin was absent from the meeting.

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