Preliminary plans for St. Albert's municipal energy corporation (MEC) include a marketing agreement with a company called Utilitynet, in the hope of a profit return for the city from residents who sign up.
While market prices on energy are set by the Alberta Electric System Operator (AESO), Utilitynet goes directly to large generators and purchases power to offer its customers the option of a fixed or variable rate, similar to Direct Energy.
The MEC is looking at marketing Utilitynet’s energy services, including electricity, gas, and Internet. In return, Utilitynet would provide the back end of the services, such as billing, customer service, and information technology (IT).
While typical energy retailers absorb all the profits from energy services, Utilitynet's model allows energy marketers to sign on and collect a portion of the revenue, keeping profits within the community and creating local jobs.
Utilitynet is based out of an office in Calgary, and began its energy marketing partnership a decade ago in Olds. The company now has 23 energy marketing partnerships across Alberta.
Nick Clark, Utilitynet director, said the business model allows customers to “take advantage of something different."
“You’re not dealing with a call centre overseas," Clark said. "Instead, you have a business that is 100-per-cent local.”
The power produced by the MEC’s other potential project — the 15-megawatt (MW) Badger Lands solar farm — would not be available for customers to purchase through Utilitynet.
Clark said this would only be possible in the future if the solar farm became a large enough generator and entered into a power purchase agreement (PPA) with Utilitynet. Currently the lowest PPA purchase Utilitynet will make is 1MW.
“That’s out into the future, but we never want to say never,” Clark said.
A look into projections
The City of St. Albert did not provide a staff member last week to answer The Gazette's questions directly, but instead sent an emailed response from the city's utility and environment department.
In the emailed response, the city said it is projecting an average of 220 ratepayers per year will leave their current energy providers and sign on with Utilitynet. In the MEC’s feasibility report, this number is projected to grow by a constant amount for 23 years, before flattening out at 5,000 customers.
This is actually a different number than the one that appears in the feasibility report. There, it said 200 ratepayers per year are projected to sign on. In the emailed response to The Gazette's questions provided by the city, this was identified as a typo, and the city said correct number is 220.
These projections see the MEC generating about $72.40 per ratepayer in its first year of operation by charging a markup of one cent per kilowatt-hour (kWh). This money would go back into operating costs until the city projects it will make a $100,000 profit beginning in 2027 on this portion of the MEC.
Additionally, the corporation will charge customers a $6.40 administrative fee per site per month – $4.40 of this fee will go to Utilitynet, with $2 to the MEC, resulting in an additional $24 per customer each year for the corporation.
For each customer who signs on, the city will have to front about $200 in prudential charges to guarantee payment to the energy generators and to the distribution utilities for delivery charges.
Customers can choose to take on this prudential themselves, ensuring a cheaper rate on their energy. If a customer chooses to leave Utilitynet, the prudential they paid will be returned to them, plus interest.
According to the emailed response from the city, the MEC’s feasibility report assumed 40 per cent of customers would pay into the prudential, based off of an example scenario provided by Utilitynet.
The city has estimated the total prudential they will pay in the MEC’s first year of operation is equivalent to $26,400.
The corporation’s operating costs in the first year for the energy marketing portion are projected to be $54,360, and include dedicated staff costs, additional overhead valued at $1,000 a month, and a cost of capital charge for the prudential.
Long-term projections in the report see the energy marketing portion bringing in $7.7 million in revenue after 30 years.
Kate Polkovsky, who was St. Albert's director of utilities and environment when interviewed by The Gazette for this story in July, highlighted the conservative nature of the feasibility report's projections, emphasizing the city will “get out what it gets in.”
“It will really be about how the city connects with people to tell the story of why they should be buying power and Internet from this particular corporation, and what the benefits would be,” Polkovsky said.
Polkovsky is no longer employed with the City of St. Albert.
Marketing strategy
Ultimately, the marketing strategy would be determined by the corporation, and could include anything from social-media campaigns to setting up at farmers’ markets.
Last year, the Village of Stirling partnered with Utilitynet through their municipally-controlled corporation Ridge Utilities Ltd. Stirling Mayor Trevor Lewington said the corporation has been marketing through social media, door knocking, and direct mail, but said a “huge chunk” of getting the message out has happened through word of mouth.
“People have signed up and now they’re telling their friends and neighbours,” Lewington said. “They understand this is a community-owned organization, and I think that’s something that resonates with people in this day and age.”
If St. Albert’s MEC were to partner with Utilitynet as an energy marketer, the corporation would be able to market to anyone in Alberta.
Additionally, the MEC would have the opportunity to enlist other communities with Utilitynet’s Marketing Associate Program. In this program, smaller communities can piggyback off the original energy marketer by selling Utilitynet services to their communities for a cut of the corporation’s markup.
Lewington said the towns of Raymond and Magrath have also become marketing associates of Ridge Utilities Ltd.
“They promote Ridge Utilities to their residents, and we split the commission with them on those recurring revenues,” Lewington said. “It’s another way for us to work together.”
A more detailed business case for the MEC will be brought forward to the next council in 2022.
