One of Calgarys most valuable municipal assets may be back on the auction block, after citizens pulled the plug on a hastily-planned privatization last summer. The community is rallying again to short-circuit a scheme that stems from Albertas deregulation plans and that could have seen part of the utility sold to Enron just months before the utility giant dissolved in scandal.
In July 2001, as its mandate was drawing to a close, city council voted at a secret meeting to sell Calgarys electrical utility. Enmax owns and operates transmission and distribution systems, providing electricity to more than 400,000 residential and commercial users.
The closed-door meeting unleashed a flood of powerful community reaction. CUPE 38 members, Enmax workers, launched a public campaign. A Save Enmax Coalition sprang up, gathering thousands of signatures on a petition. Citizens were adamant that one of the citys crown jewels could not be sold out from under them, and made the sale a key election issue.
A poll found 77 per cent of Calgarians felt they hadnt been adequately consulted about the sale. When asked, 45 per cent opposed the sale and 19 per cent were unsure. The results of the municipal election brought a new mayor and a new approach.
While city council hasnt ruled out the sale, they are opening the door to a public debate. The case for keeping Enmax public is an open-and-shut one.
The utility, estimated to be worth as much as $1.2 billion, is bringing record returns to the city as much as $100 million this year. Enmax supporters say the returns cant be replaced by selling the utility and investing the profits an argument backed by economists studying other scrapped utility privatizations in Edmonton and Toronto. Surrendering this secure and relatively stable revenue stream in exchange for risky returns on sale proceeds crosses wires with the coordinated municipal lobby calling for new sources of revenue from provincial and federal governments.
Enmax is more than an investment vehicle, it is an engine of our citys economy, says CUPE 38 president Peter Marsden. Selling Enmax will mean higher electricity prices for consumers, and profits being invested offshore rather than being used to keep down taxes.
Even the latest consultants report, written by global privatization pushers PricewaterhouseCoopers, acknowledges key reasons to keep Enmax public, including foreign ownership concerns and the power to set service and reliability standards. Maintaining ownership would let the city exercise some control over rates, possibly cushioning some of the impacts of deregulated prices. Integrating delivery of electricity with the delivery of other essential services was another reason to keep Enmax public, along with avoiding the outcry that would come from selling a heritage asset.
Youll have more control over city growth and planning. Youll have operating dollars coming in every year that can be directed as council sees fit. Keeping the utility with the cash flow it provides is a great benefit, says Marsden.
CUPE members are highlighting another facet of Enmaxs power workers flexing their economic power in the community. The sale of Enmax puts 400 well-paying jobs in jeopardy, threatening a yearly economic spinoff approaching $80 million in consumer spending.
Several of the sell-off scenarios involve the work of Enmaxs billing division leaving the city possibly to call centres outside the country. Outsourcing the work offshore would leave its mark on the economy and on service to customers. Community accountability would also dwindle, as international shareholders served their own needs, not Calgarys.
People at the Enmax call centre do customer relations. You cant find someone to do that job competently for $8 an hour. You have to attract the best possible people. That comes with a cost, says Calgary resident Debrah Wright.
Deregulation brings climate change
The Alberta government paved the way for the Enmax sale in preparing the ground for provincial electricity deregulation a process some analysts have dubbed re-regulation of the industry for commercial, not social, purposes. Following the provinces restructuring lead, Calgary incorporated Enmax as a wholly owned subsidiary with its own board of directors, setting up a corporate structure that makes it ripe for the plucking.
Those pushing Enmaxs sale argue the deregulated market creates too much uncertainty and risk for the city. The city describes Enmax as a small company, competing in an industry of giants. Ironically, one of the companies interested in buying Enmaxs retail business last summer was Enron, which imploded in December in a scandal that sent shockwaves of uncertainty and risk through the US economy and the industry. In addition, profits from the sale would likely be invested into the stock market, a move that brings many risks and few guarantees.
The plan to invest the sale proceeds hasnt been made clear. If the city cant manage the funds well, or misspends them, we could lose money, leaving us in real trouble, says Wright.
In an all-too-common conflict, the investment bank advising the city on its original sale plan stood to collect a cut on the sale. A similar conflict emerged in Edmonton, where the corporate advisors clearly had an interest in the municipal utility being sold.
Enmax CEO and president Bob Nicolay sees the utilitys future as ultimately [to] be a fiercely competitive business enterprise. In the race to survive in Albertas new electrical order, he argues that corporate Darwinism is alive and well and living right here in the Alberta electricity industry.
While survival of the fittest is a common corporate image, its a most unnatural evolution. Deregulation is a man-made process that has skewed the priorities of municipal utilities, forcing them to make growth not public service their ultimate goal. Edmonton citizens won the fight to prevent the common wealth of their utility, Epcor, from being converted into corporate wealth. Calgary citizens are equally determined to protect their public assets from the privateers greed.
I dont believe the public has been given complete information about all the impacts the sale of Enmax could have, says Wright. The public hasnt been provided with enough background and rationale. Whos going to benefit, and is there any conflict of interest?