Council is privatizing our utilities

Collingwood council and its administration are planning to privatize both our water and electricity utilities. All, of course, without consulting you, the public. Some members of council have even stated – with a straight face, mind you – they would ask for your input at a later date. A date long after it’s too late for public input to matter, of course.

They have already engaged in negotiations with outside companies to take over our utilities, all the while pretending they were just “kicking the tires.” They appointed their lawyer to oversee the sale. Consultants made reports painting the existing situation with faux negativity, from early 2015.

In 2012, the former council determined (after considerable public discussion and public consultation) to sell only 50% of its share in the electrical utility, not 100%, and not water, because that would mean a loss of control over services and rates, loss of accountability and openness, plus additional liabilities. This council is determined to give away those controls, reduce accountability and transparency. It will cost taxpayer millions. And they’re doing it all in secrecy.

“I will assure you, no decisions have been made, we are just exploring our options with any interested parties,” Councillor Madigan said last July – facetiously I assume, because by that time, more than 18 months of in camera discussions had been held. Surely he was awake through at least one of them.

Council has acted in bad faith and conned the public about this ever since it took office. No one expects them to be honest or open about it now. Their plan was made evident in 2015 when The Block fired the existing water utility board (a group of talented professionals with considerable experience in water) in violation of the town’s procedural bylaw, and replaced them with five members of their own group – none of whom have any experience in water or wastewater (and none of whom have any talent). That signalled their intentions.

A recent request for proposals (RFPs) for the sale of the town’s share of the electrical utility was sent to utility corps – including, people in the industry lead me to believe, EPCOR, in Alberta. These RFPs belie that pretense that this is just “kicking the tires.” It’s always been a full-blown conspiracy to privatize our utilities. You don’t send out RFPs to corporations just to see if they’re interested. You do it because you intend to sell. Once started, the process is irrevocable. And inevitably expensive.*

But electricity is only part of the plan. All along it’s been a bigger picture: to sell both electricity and water/wastewater services. And let the taxpayer pay for the fallout. As Food and Water Watch documented (in the USA):

Investor owned utilities typically charge 59 percent more for water service than local government utilities. Food & Water Watch compiled the water rates of the 500 largest community water systems in the country and found that private, for-profit companies charged households an average of $501 a year for 60,000 gallons of water — $185 more than what local governments charged for the same amount of water. Investor owned utilities typically charge 63 percent more for sewer service than local government utilities. Food & Water Watch compiled sewer rates survey data from dozens of states and found that private ownership increased sewer bills by 7 percent in West Virginia to 154 percent in Texas.

Similarly, in Bayonne, New Jersey, when French-owned Suez got a 40-year contract to take over water services, water rates rose 8.25% in the first year and 13.25% shortly after. As Quartz explains: “…a clause in the contract guarantees Suez and KKR a minimum amount of money. Because residents used less water, the partnership gets to hike rates to make up the difference.” Suez lost its water contact in nearby Camden after it mismanaged the water system and cost taxpayers millions of dollars. So privatization clearly isn’t always the best route.

Sources differ whether the town received two or three offers in response to its RFP.** One we know was from PowerStream which already owns half the electrical utility – that offer was flatly rejected on January 6 by eight of the nine. Again done without public discussion, input or even any explanation why from The Most Secretive Council Ever.

One offer probably came from EPCOR – the Edmonton-based utility that tried to get its hooks into Innisfil, but failed. EPCOR is still hungry to get a foothold in Ontario, however. And they worry me. A lot.

EPCOR is about water. It would like to take over running the water and wastewater operations in Collingwood as a foothold in Ontario, although privatizing that, like the rest of this disaster, hasn’t been discussed publicly. It will just be done, a fait accompli, without public consultation. Another back-room scheme from The Block. ***

Nor does it matter that privatizing municipal water and wastewater has been an unmitigated disaster for residents and municipalities in many parts of the USA. Your water rates will skyrocket when this happens here – not the mere 5% this council raised the rates unnecessarily in its first budget: EPCOR needs to make its money back and you, the taxpayer, will have to shell out for their purchase. Much more. And they aren’t shy about demanding it.

Take Strathmore, Alberta, a town of 12,305, or about half the size of Collingwood. The town pays EPCOR $2.5 million annually to runs its water and wastewater services, about 20% more than what it pays for policing. During recent budget discussions one councillor questioned the rising water rates only to uncover the bad news:

A question from councillor Steve Grajczyk about the water treatment plant and the contract with EPCOR revealed that the cost for water and sewer services have increased significantly.

Similarly, in Sun Valley, Arizona, where EPCOR operates the water system and wanted to raise rates:

Mr. Eisert said EPCOR officials’ rate increases ($25.03 in Sun City and $35.38 in Sun City West) would pay for the cost of running those districts with existing equipment. However, raising the rate to $41.02 means anything over the proposed rate increases for the Sun Cities is going to the other districts. “We subsidize everyone else, and that’s bad news,” he said.

EPCOR is the largest private water company in the state and in New Mexico, operating service to 22 communities and seven counties. This rate hike became a hot political issue in the recent US election, in which all candidates opposed it:

One of the issues residents have brought up to all three candidates — like with Sen. Debbie Lesko and Maricopa County Board supervisor Clint Hickman — is the EPCOR wastewater proposal to consolidate five Valley districts, which would increase the rates of Sun City residents from $22.11 a month to $41.02. The candidates are against the hike, listing residents’ financial woes as a reason for their opposition.

And it did the same in its home town of Edmonton:

Council approved five-year water rates Tuesday, which will rise 1.8 per cent a year to an average $39.92 per residential home by 2021. Those prices include increased water main repairs, expanded fire protection and a switch to green power, likely through a new solar energy park, starting in 2018.
The waste water bill is also increasing, from an average $15.99 today to $20.34 in 2021. That includes upgrades to the Gold Bar Waste Water Treatment Plant, where hydrogen sulphide is corroding the concrete pipes faster than anticipated.
Together, that will add $7.84 to residential monthly bills at the end of five years.
To do the work, Epcor gets a return on its capital investment of 10.2 per cent. That was negotiated down from 10.5 per cent in the proposal it brought to council in June. The company is governed by a detailed performance-based rate system that sets targets and encourages it to find efficiencies.

And as reported by the CBC in a piece titled, “Water rates to rise, but city asks EPCOR to turn tap on profit margin”:

Edmontonians can expect their monthly water bills to rise by $6.71 by the end of 2021. The average household currently uses about 14 cubic metres of water monthly, costing about $51 dollars. EPCOR proposed the hike rise more quickly earlier in the five-year period, but city council’s utility committee asked the company to even it out over the period. It also asked EPCOR to revisit the return on investment — its net income — and productivity projection.

So EPCOR is all about the profits. That’s not bad in a private corporation, but is it what you want running your municipal water system where your rates are vulnerable to hikes without your input? At least now you can protest to your elected representatives. But once the utility is privatized – you’re SOL. The company has a contract to protect its profits. Pay up and shut up.

And that’s what residents in the small town of French Creek, BC were expected to do when EPCOR announced a plan to hike water rates 46% after it took control of Breakwater Enterprises Ltd., “…a private water system in French Creek that then had some 1,600 connections serving roughly 4,000 people.”

The irony is that if you conserve water, you end up paying more because the corporation’s profits are guaranteed no matter what you do.

In 2014, auditors for the city of Phoenix found EPCOR overcharged the city $2.7 million over five years:

A city audit claims a north Phoenix private water and wastewater provider overcharged the city $2.7 million over five years and also passed on an unnecessary tax to the city… Phoenix directly provides water to the majority of its residents. However, in this case, Phoenix buys water from EPCOR, which allows the city to use its pipes to serve residents.

CUPE has a paper published on privatization of public utilities and specifically about EPCOR. You can read here. It notes:

EPCOR has been involved in many controversies over the past few years and it has been criticized because of its contradictory position as a publicly-owned utility operating as a private corporation.
EPCOR is an example of a fully corporatized utility, which reduces the involvement and oversight of operations by Edmonton’s city council and other stakeholders. EPCOR has fully embraced the culture and practices of a for-profit corporation and in doing so has restricted the accountability and transparency to the public and its single shareholder, the City of Edmonton.
According to a report prepared by the Federation of Canadian Municipalities and the University of Toronto’s Munk Centre for International Studies, other disadvantages of a corporatized model in the delivery of water services are potentially higher costs and incompatibility with public services mandates. In addition, the corporatized utility model used by EPCOR is widely seen as a forerunner to full privatization.

I’m sure you’ll agree that restricting the “accountability and transparency to the public” in Collingwood wouldn’t amount to much more in The Most Secretive Council Ever, but it should worry you that this council and administration will sell our electrical, water and sewage services to any private corporation behind your backs.

EPCOR is a big political force and lobbies hard. As the CUPE report adds, they are already active in promoting their own interests in Ontario:

The senior manager for Government Relations at EPCOR, Jeffrey Bertram, is currently registered in the province’s lobbyist registry as an in-house lobbyist. Darcy McNeill, a consultant lobbyist is also registered in the province’s lobbyist registry. Under Bertram, the company’s registration notes that the ministries EPCOR plans on lobbying are: the Ministry of Energy and the Ministry of Municipal Affairs and Housing, as well as the Ontario Clean Water Agency to discuss “water and wastewater infrastructure development for municipalities.” Under lobbyist Darcy McNeill, the lobbying subject matter includes: energy and infrastructure, and EPCOR plans on lobbying Members of Provincial Parliament (MPPs), the Ministry of Economic Development Employment and Infrastructure and the Ministry of Energy to raise “awareness with government officials about services [the company] provides, including water and wastewater infrastructure development.”

EPCOR is lobbying the province to change its legislation to better suit their business model. In a presentation to the standing committee on Bill 72, Water Opportunities and Water Conservation Act, 2010, John Gorman, stakeholder relations for EPCOR in Ontario, said:

…we’ve been watching the Water Opportunities Act and the Ontario market with great interest. This is not a market where large infrastructure companies like EPCOR have been able to participate and lend their expertise. I think that’s due to the absence of a framework in this province that allows the participation of companies like EPCOR. I think the second part of that is that municipalities have a very entrenched way of running their operations and managing their assets and their infrastructure, which has largely been to the exclusion of partnerships with the private sector and AFPs.

He then said:

We would encourage this committee to look at doing things like introducing hard targets on the conservation side and more aggressive measures to make municipalities move to true cost accounting so that they can break out of the conventional way that they’ve been doing things and look to more aggressive and innovative solutions.

In other words, he wanted the government to make changes in the legislation to force municipalities to play ball with private corporations like EPCOR. That’s no better than Airbnb or Uber or any of the other predatory corporate bullies who lobby for preferential treatment. Should shareholders’ interests override public interest?

Was anyone on our council or in town hall lobbied by a bidder? Was anyone wined and dined, taken out to an exclusive golf course, or promised a commission, or even a job?**** As the BC Business Journal reported about a case of water privatization in that province, lobbying with perks is common (and apparently legal) practice:

…it’s clear the private sector is ready to jump into the pool with both feet. “I’ve been told that there’s not a city councillor who hasn’t been taken out for lunch by someone from Terasen or EPCOR,” Dickout says.

And on Vancouver Island, the public is wary about privatization:

…the reaction to private sector involvement ranges from energetic to downright hostile. In March, on the eve of World Water Day, Courtenay city council narrowly passed a resolution introduced by the local Council of Canadians chapter ensuring that delivery, management and regulation of water services will remain a public responsibility. Councillor Greg Phelps, manager of a local FM station, supported the resolution, saying he was wary of the “commodification” of water and feared the day his kids would have to monitor the stock market for water prices.

Also in 2016, residents of French Creek, BC, voted 98% to take back their water system from EPCOR (a process known as re-municipalization):

With a 98 per cent mandate from community members who responded to a survey, the French Creek Residents Association (FCRA) has formally set the gears in motion to buy its water system.
The FCRA’s Rob Williams told the Regional District of Nanaimo (RDN) board Tuesday night that the association wants the RDN to buy the community’s water system because “it is privately owned, it’s predicated on profit… we’re paying double the cost on capital expenditures for money we could borrow through the municipal finance authority.”
The French Creek water system is owned by Epcor, a private company owned by the City of Edmonton, which Williams said “costs us more, because they get to earn a profit on everything they spend.”

Also in 2016, residents of “…Sooke voted unanimously to bring water management back in house when the contract with a private company expired.” That private company was EPCOR. And Sooke municipal staff said they could save money bringing it back in house:

The District of Sooke has voted unanimously to end their contract with for-profit contractor EPCOR and bring wastewater services in-house. Sooke staff estimate that the District can save approximately $225,000 annually by operating and maintaining the system themselves.

The Canadian Centre for Policy Alternatives published a paper titled, “Waste-water and Water Privatization: A Clear and Present Danger,” in which it described Winnipeg council’s similarly secretive move to privatize water. The paper asks: “Why would we want less democratic decision making with such an essential public asset as water?”

A good question, one that should be on every reader’s minds as you read this. It adds that,

…evidence shows that corporations are extremely adept at avoiding regulations, or that the penalties levied for non-compliance are inconsequential. EPCOR, for example, was fined a mere $3,500 under the Alberta Environmental Protection and Enhancement Act when it failed to obtain approval before starting to build a new wastewater treatment plant (EPCOR has more than $4 billion in assets).

The report concludes:

Provision of water and waste-water services is of great importance and the City should not undertake major changes to the governance of these services without extensive public consultation. MCUs ( Municipal Corporate Utilities) in other jurisdictions have undermined public accountability …

Imagine our council offering “extensive public consultation…” on any issue. No, I can’t either.

EPCOR doesn’t seem content with just running one part of a system: they want it all. And by all, I mean everything water touches. And that means not just operating, but owning. This piece is from the Edmonton Journal, titled, “Councillor livid as Epcor makes fourth bid to take over Edmonton drainage,” notes:

Epcor is publicly asking Edmonton for the fourth time to let it take over all drainage services, promising to protect customers and city employees in the process.
The company says it would mean a $20-million increase in annual dividends for the city as the company markets Edmonton flood prevention expertise worldwide. Council has previously rejected the requests. This new attempt was a surprise addition to a public council agenda released Thursday…
It started in 1995 with ownership of Edmonton’s power generation and distribution. In 1996, it took over Edmonton’s drinking water treatment and distribution facilities, then took over waste water treatment at the Gold Bar plant in 2009.
That last acquisition prompted a public protest by five civic unions, the Council of Canadians, the Parkland Institute and Sierra Club of Canada. That campaign, Keep Drainage Edmonton, argued giving drainage assets to Epcor makes the system less transparent.

That dividend is the worm on the end of a very sharp hook that tempts unwary councillors. The sort of flashy trinket that would easily hook our naive Blockheads and their pet administration. The Council of Canadians warned,

Epcor is a for-profit municipal corporate utility (MCU), a city-owned business that operates as a private corporate entity without public reporting requirements. Among other assets, the proposed purchase would give the company 6,000 kilometres of storm, sanitary and combined drainage pipes and 240 stormwater ponds and management facilities… In 2009, City Council voted 7-6 to approve the Epcor purchase of the wastewater treatment plant.

It’s not hard to imagine the same scenario happening here. First they take over operations, then they buy the facilities, then the pipes…

Edmonton council wasn’t too happy with EPCOR, either. A story in the Edmonton Sun from November, titled, “Edmonton city council questions Epcor’s flood protection and drainage efficiency claims,” notes:

City councillors worried Epcor’s need to turn a profit could drive drainage rates higher if they hand flood protection and drainage to the Edmonton-owned corporation.

What about jobs? Well, with a similar debate happening in London, Ontario, one blogger for the Council of Canadians wrote:

With EPCOR taking a slice of the profits in their share of dividends we end up paying more for our services so that EPCOR can have a share in “OUR” profit for the City of Edmonton to offset THEIR taxes.
Why would we do that?
Profit = Jobs for EPCOR
Revenues – Expenses = Profit
The “expense” part of the formula includes wages which equates to jobs in the City of London.
In the EPCOR scenario, EPCOR takes care of a portion of the wage expense and jobs move to Edmonton.

And when EPCOR came courting London’s hydro utility in 2011, councillors were wary:

…some politicians say they’re reluctant to jump into bed with EPCOR — fearing loss of public accountability and rate increases from a profit-oriented partner.
“I’m very careful about jumping into bed with someone with whom you have just started flirting,” said Coun. Nancy Branscombe, a committee member. She worries EPCOR’s focus on growth might not be compatible with delivering safe water and reliable service.

So wary, in fact, that in 2011, council closed the door on EPCOR, and reminded them again in 2016:

Forbidden by the last council even to talk about a partnership with Epcor, a giant Alberta utility, London Hydro has watched many other middle-man utilities in Ontario consolidate to improve efficiency or be swallowed by bigger players, including Hydro One, the provincial giant that’s being privatized as Ontario sells off a majority stake.

In 2008, Vue Weekly commented on EPCOR’s request to transfer ownership and control of the Gold Bar Wastewater Treatment Plant to EPCOR, a $750 million asset, for a $75 million. Edmonton, the company said, would benefit from increased revenue of $190 million over the next 10 years. The writer of the piece comments:

The people of Edmonton have shown time and time again that they believe fundamentally that the public interest is best served when utility services are publicly owned and administered for the public good. Why then do we continue to allow a utility company which we own to practice predatory privatization practices in other cities and communities? Imagine if Toronto city council decided to come in and make a bid to purchase our water, power and drainage services—how would we react? If we wouldn’t stand for someone else doing it to us, then we shouldn’t be doing it to others…
Perhaps it is time to take back control of its utilities—power and water—from EPCOR in what could be termed a re-municipalization of services. This would protect those utilities from future privatization, and would also mean that they could once again exclusively serve the public interest of Edmontonians instead of EPCOR’s corporate ventures around the continent. Publicly owned utilities working for the public good of Edmontonians should be a compelling vision for all of us.

The site Public Values.ca has a piece titled, “Edmonton illustrates perils of corporatized water,” in which the author writes,

People of Edmonton have no accountability or oversight over the workings, service and decision-making of corporate water-provider Epcor… Epcor’s own governance principles articulate this relationship very clearly: “Epcor’s board operates independently of the shareholder with the full authority to make strategic business decisions.” In other words, there is no accountability to or oversight by the people of Edmonton over the workings, service and decision-making of Epcor.

Which is exactly what will happen here, in Collingwood, once we privatize our water and wastewater services.

But water and power are not the only things EPCOR is involved in. They partnered with SNC-Lavalin to sell insurance on pipes:

EPCOR, the company that is building the controversial Heartland power line together with AltaLink and Quebec-based SNC-Lavalin, has teamed up with a questionable firm selling water and sewer line insurance (Edmonton Journal).

Well, you say, that sounds reasonable. Then read on:

The deal appears even more shady, as the Edmonton Journal’s research reveals. The fine print indicates there are many types of damage and repair that HomeServe’s insurance will not cover. And, if you have a problem with your water or sewer line, the fine print says HomeServe will ensure the repairs get done “as soon as practicable”. Wow…that’s reassuring, since most of us would probably consider damage to either our water or sewer line as an emergency. The Journal dug a little deeper and discovered through the Better Business Bureau that HomeServe has been investigated by 4 U.S. states for violating consumer protection laws, and the company paid a whopping 750,000 pound fine ($1,188,990 CAD) for breaking Britain’s phone soliciting laws. HomeServe is also under investigation for its sales practices by the U.K.’s Financial Services Authority.

What does that say for the credibility of those partner corporations?

Is privatization more efficient than public ownership? Not according to studies done by the American Food and Water Watch:

Privatization often increases costs. Corporate profits, dividends and income taxes can add 20 to 30 percent to operation and maintenance costs, and a lack of competition and poor negotiation skills can leave local governments with expensive contracts. Read the fact sheet: Public-Private Partnerships: Issues and Difficulties with Private Water Service.

And, it warns, based on their analysis: Privatization can worsen service; Private operators may cut corners; Privatization typically leads to a loss of one in three water jobs; Privatization can allow systems to deteriorate.

So you lose control, lose jobs, get worse service and maintenance, AND you pay more for the service. Just what The Block intends.

I could go on (there’s a lot more online if you care to do the searches), but I’m sure you can see the pattern here.

The point is not really about EPCOR: it’s about The Block selling our electrical and water utilities to corporations who have no interest in Collingwood residents, about our council and the administration wheeling, dealing and scheming to do it behind closed doors, and about pretending they are just “kicking the tires” when all along privatization of municipal services has been their goal. It’s about being lied to and deliberately kept in the dark by our elected representatives. And it’s about the millions of tax dollars it will cost us for their witch hunts.

Collingwood deserves better.

~~~~~
* Corporations spend considerable time and effort on preparing RFPs. An RFP is a statement of intention: courts have found it implies a contract is forthcoming to the winning bidder (otherwise the municipality would issue a Request for Expressions of Interest – RFEI – prior to an RFP). If bidders find out the municipality wasn’t seriously going to consider them – acting in bad faith or just “kicking the tires” – they can sue for at least their costs for that preparation (See Buttcon Limited v. Toronto Hydro, 1992). There is a “duty of fairness” required of the municipality you can read about here and also here and here (the latter explains, “The law implies an obligation of fairness on the part of the owner to treat all tenderers fairly and equally, without the application of hidden preferences, undisclosed noncustomary bid evaluation criteria, or conduct in the nature of bid shopping or which gives a tenderer an unfair competitive advantage over others.”). Also, all bidders have to be offered the same conditions – e.g. negotiating for water services with the winner after the bid process – violates the law. You also cannot negotiate privately with a preferred bidder – called “bid shopping” – while inviting bids from others (Sec. 426 of the Criminal Code).
** The possible third bidder – if there was one – is unknown to me and may only be a rumour. I was told that Ottawa Hydro had declined to make a bid, however. Possibly they knew it was pointless to bid since PowerStream has first right of refusal and a shotgun clause in its shareholder’s agreement. And I’ve also been told that Hydro One also saw the bad optics and declined to submit. If so, that doesn’t leave many possibilities. Veridien? They responded to the 2011 RFP, so maybe… but who among them wants to buy 50% of the utility? The Block ruined the partnership model that was previously highly touted across the province as an example of operations. Now no one wants to be in bed with the town: everyone want all of the utility with NO town involvement or interference. Council to deliberate bids in camera (of course), January 20.
*** When council rejected the PowerStream offer, it gave rise to speculation that the town would itself pull the shotgun clause on PowerStream to buy the second share of the utility back. Then – after getting rid of some troublesome (as the Block and administration see them) employees at Collus – it would sell the entire utility to EPCOR, with the water and wastewater services thrown into the deal. The troublesome matter of the $500,000 or more in unplanned annual billing expenses council didn’t warn us about would be taken care of in the process. Probably this will be sole-sourced, too, like so many other contracts this term. No, you won’t get any more say in the process than you have already had to date.
**** I’m sure a judicial inquiry or police investigation (based on Sec. 121 and 123 of the Criminal Code) will tell us. There is a requirement in the town’s Code of Conduct bylaw for councillors (not staff) to report gifts, but the limit is high (more than a typical lunch) and The Block openly ignores that bylaw anyway.