EPCOR Drainage Proposal: My Final Thoughts
Over the last 10 months we have had numerous meetings regarding the EPCOR proposal to transfer drainage utility services to their operations. During this time I have written three other posts to keep people informed about my thoughts on the issue as well as to ensure you could easily access the information that has been presented. This is not a simple issue which means there is no way to try and summarize everything that has occurred. If you have not had a chance to read through my previous posts or the information that has been presented in the reports, including the independent assessment, please start by reading my posts from June 2016 , October 2016 , and February 2017. These posts provide you with the necessary context for my final post on this topic.
In advance of making my final decision, I spent the last week listening to the previous Council meetings and reviewing all the available information/reports from those meetings. I understand that this decision is one of the most important ones that will be made so I wanted to ensure that I did not miss anything before voting on this topic. As you will have read in the June post, when I first heard about the proposal, I was quite skeptical. With that said, I had nothing to base my skepticism on and knew that before I could say yes or no, I needed more information so that I would be able to justify my decision.
Each step of the way the concerns I had were getting addressed either through the information provided in the reports or the responses I received during the City Council meetings. The common theme I heard from residents as well as those at the Public Hearing were concerns around transparency, accountability and governance. That feedback is what helped inform the motion I made during the Public Hearing which you can read in the February post. Having read through the Letter of Intent and asked questions of our Administration and EPCOR on the April 12, 2017 City Council meeting, I presented the following motion and voted in favour of the proposal to transfer drainage to EPCOR:"1. That the transfer of the Drainage Utility assets and liabilities to EPCOR in accordance with Attachment 1 - EPCOR Proposal - Letter of Intent to Financial and Corporate Services report CR_4436 be approved with the following additions:
Include a requirement that EPCOR provides updates to every Utility Committee meeting in 2017 and 2018 with respect to the Drainage Utility.
The Asset and Liability Transfer Agreement include a requirement for City Council approval through a public hearing of any proposed sale of all or substantially all of the City of Edmonton Drainage Utility assets.
That the City and EPCOR submit a joint request to the Privacy Commissioner requesting clarity on the jurisdiction of FOIP and appeals jurisdiction, and if it is determined that FOIP does not apply, EPCOR and the City will ensure there is a requirement in the appropriate legal instrument for an appeals body that is mutually agreeable to the parties
That the transfer agreement and the Rates and Procedures bylaw direct regular reporting regarding performance, provision of service, changing context and ability for Council to make inquiries of EPCOR
2 . That the City Manager be authorized to negotiate and settle the terms of, and execute and deliver on behalf of the City of Edmonton, all agreements, documents and instruments required to give effect to the transfer of the Drainage Utility assets and liabilities to EPCOR in accordance with Attachment 1 - EPCOR Proposal - Letter of Intent to Financial and Corporate Services report CR_4436, and including the additions in Part 1, as the City Manager determines to be necessary or desirable and in the best interests of Edmontonians generally.
3. That the City Manager prepare recommendations for revisions to all applicable bylaws to effect the transfer, including Bylaw 16200 - Drainage Bylaw and the proposed EPCOR Drainage Bylaw and return to Utility Committee on June 9, 2017.4. That the City Manager prepare recommendations for revisions to Bylaw 12294 - EPCOR Rates Procedures Bylaw to provide Council or Utility Committee with authority to require EPCOR to provide:
a. Periodic reports relating to the utilities regulated by Council
b. Reports relating to information requested by Utility Committeec. Audit Reports"
This was far from an easy decision but I hope to provide some of the rationale for my vote in the rest of this post.
Financial Impact
While previous posts have not focused much on the financial side of things, it is important to note that one of the key reasons the proposal made it as far as it did was because the independent assessment (you can access that report in the October post) clearly stated that the proposal had ‘strong merit’. In fact, after requesting additional comparative information which can be viewed by clicking on one of the links in the February post, one of the first sentences in the additional independent report says, “Based off the analysis presented in this document, EPCOR’s proposal continues to have the potential to yield net benefits to the City, taxpayers and ratepayers.” The financial impact is not something that can be ignored and while no decision we make is ever without risk, there is a strong financial case to be made for approving the transfer.
The independent assessment was understandably conservative in its approach but I would like to highlight one point that was not considered in the assessment but has the potential to add even more value. Prior to this proposal, we received a $146 million/year dividend and upon finalizing the agreement, that dividend will be increased by another $20 million in 2018. With the entire water cycle now under the control of EPCOR, they will have more opportunities available to them when bidding on future contracts. EPCOR has seen significant expansion in the United States and having expertise in all aspects of the water cycle will make their bids more competitive. As they continue to expand into new markets, that will allow EPCOR to increase the dividend they pay to the City every year.
It has been argued that there is no guarantee EPCOR will be able to deliver on their promise of being more efficient and therefore may not have as positive an impact to residents. I cannot dispute that there is no guarantee but that can be said of almost every decision we make. Since there are no guarantees, we have to rely on a critical analysis of the information presented and determine if the risks have been thoroughly mitigated. As mentioned above, there is a great deal of information that was presented as part of this proposal and so it would not be possible to summarize the 110 page independent assessment or the 41 page additional information report. In order to get the best understanding of the financial impacts, please read through both reports.
One other comment raised in the past few days was that the City should be able to achieve most of the efficiencies identified by EPCOR. While I appreciate that suggestion, it would mean that our current city management and staff are not regularly looking for efficiencies, which I know is not the case. I am not suggesting that there are no cost savings measures that can occur but rather that the extent of those cost savings would not be on the scale of what is being proposed. Just as we are experiencing efficiencies by bringing all infrastructure projects under our Integrated Infrastructure Services Department, EPCOR will be able to experience efficiencies by having total organizational focus on the water cycle.
A final point on this topic would be the impact to our flood mitigation program. This is tied to the financial portion of the conversation because EPCOR is expecting to deliver a 10% efficiency to the capital program. As you may be aware, there is significant work taking place around a flood mitigation study. As with our other critical infrastructure, upgrades are needed to address possible flooding concerns. This is a large project that will require decades of work. Having the ability to complete this work 10% quicker will make a huge difference for residents living in areas where the drainage infrastructure is in need of upgrades.
Transparency, Governance and Accountability
Since the financial aspect of this proposal is so strong, the majority of my time was spent on our ability as a city and a Council to retain control. The post in February outlined my primary concerns and the need to have them addressed in writing. While the verbal responses I received during the Public Hearing in January were reassuring, seeing those responses put into writing would allow me to determine if we could be confident in our ability to maintain proper transparency, governance and accountability. The entire Letter of Intent can be viewed in Attachment 1 here. I believe the Letter of Intent addressed a majority of the points that were raised by residents throughout the process but I did still have a few areas I wanted further clarity.
While the likelihood of EPCOR attempting to sell our drainage asset is extremely low, there was a legitimate concern about the ability for that asset to be sold without any public input or meetings. This was the situation with Capital Power back in 2009 where the decision to sell was done behind closed doors at an EPCOR shareholders meeting. While members of City Council are the shareholders, without any public discussion or debate it was challenging to understand why that decision was made. To ensure something like that could not happen the Letter of Intent states that a Council meeting would be held, but it also noted that there is a chance that meeting could be in private. While a requirement of a Council meeting already guarantees a more public discussion, I was interested in determining if a Public Hearing could be required instead of relying on a future Council to make a motion to hold a Public Hearing if there ever was a suggestion to sell that asset. Thankfully as you will have read in the motion above, that requirement of a Public Hearing will be in the agreement.
The next question I had was with regards to our right to audit. I was pleased to see the right to audit in the letter of intent, but was uncertain if what was in the letter would allow Council to direct our City Auditor to complete value for money or operational audits. The response was clear that what is in the letter of intent would in fact allow our City Auditor to do the same work that they are currently able to do within the City of Edmonton.
The Letter of Intent also referenced the reporting cycle to our Utility Committee. While quarterly reporting is good, I felt it was important to have EPCOR available at every Utility Committee meeting in order to respond to questions or concerns raised by residents through Councillors. The additional reporting requirement was approved as part of the motion above.
The final issue dealt with FOIP (Freedom of Information and Privacy). While it was verbally stated that drainage under EPCOR would likely be subject to FOIP, I appreciate that EPCOR agreed to the following in case they are not, “Drainage Utility Services Guidelines will be developed as part of the Drainage Utility Terms and Conditions of Service that will include a requirement that EPCOR comply with FOIP as it relates to the Drainage Utility. The following principles outline how some of these requirements will be included in the Drainage Utility Services Guidelines:
a) A considerable amount of information requested by the public about utility services is in the public domain, either on EPCOR’s website or on the City’s website as part of a Drainage Utility rate application. Every effort will be made to direct members of the public to that information.
b) EPCOR will participate in the City’s Open Data initiative for Drainage Utility-related data.
c) In the event that the requested Drainage Utility-related information is not readily available, EPCOR will advise members of the public (Applicants) to submit their request for information in writing to EPCOR. EPCOR will log the Applicant’s request, when it was submitted and the Applicant’s contact information. EPCOR will endeavour to provide a written response to the Applicant within 30 days. In some cases it may take longer and EPCOR will communicate this. In some instances a written response may not be practical and the Applicant may be invited to EPCOR’s offices to review the information.
d) EPCOR will comply with the requirements of Parts 1 and 2 of FOIP as to the decision making process on whether or not the information can be released, or whether a fee is charged.”
While what is above is almost identical to FOIP, the one key area that was not the same was the ability to appeal. That is an important part of FOIP so I inquired about setting up a similar ability to appeal through an independent third party. Thankfully there was support from EPCOR and our Administration to allow a third party firm with experience in privacy matters to adjudicate any appeal. This means that all aspects of FOIP will be addressed in this new agreement even if they are not subject to FOIP.
The issues above were not the only ones I asked about at today's meeting, but they were the outstanding items that had not been adequately addressed in writing which is why the motion was made to identify the specific areas that needed to be recognized as part of a final agreement. I am thankful that our Administration and EPCOR were able to work their way through all of the other items raised in the January motion. The Letter of Intent, combined with the responses to the points above, allow me to be confident in our ability to govern effectively and maintain the necessary control.
Summary
This decision was not made lightly and I know there are those who do not support my decision. If you have had the chance to read through my previous posts on other topics, I hope that I have shown myself to be someone that takes the time to carefully consider a variety of perspectives before making a final decision. My objective is to make a decision based off what I believe will be best for all of Edmonton, not what will get me the most votes. Therefore, even if you disagree with the final decision I hope that by reading the four posts you will be able to understand how I approached this significant issue and why I decided to support the proposal . I want to thank each and every person who took the time to call, email, write, attend a meeting or talk to me in person as your feedback guaranteed that the concerns related to transparency, accountability and governance were discussed and in my opinion, properly addressed in the Letter of Intent and final motion. As usual, if you have any further questions or comments, please let me know.
Written by A. Knack
