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Council votes to draft business case for municipal energy corporation

More detailed plan will be brought forward to the next council in 2022.
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After a lengthy debate Monday evening, St. Albert voted to move forward on the creation of a more detailed business plan for a potential municipal energy corporation (MEC) in the hopes of addressing the city's looming deficit.  

City council motioned to direct staff to prepare a detailed business case for the MEC after hearing a feasibility report prepared by consulting firm Ernst & Young.

The city has been investigating the possibility of starting a corporation to generate extra revenue since early 2018. The additional money would help the city branch out from using property taxes — its main source of revenue — to fund services including garbage pickup, wastewater treatment, and consulting and inspection services. Additionally, the extra cash flow would protect the city amidst funding cuts from other levels of government. 

While the city was originally working toward the creation of a Municipal Utility Corporation (MUC) focusing on waste-to-energy, the current project evaluated in the feasibility report — referred to as a Municipal Energy Corporation (MEC) — focuses mainly on solar energy. 

In 2019, councillors voted 4-3 against directing staff to create a unanimous shareholder agreement for what was then an MUC. Their decision followed a well-attended public hearing, where residents expressed widespread dissent with the proposal, arguing that it lacked depth and required a more complete business plan.

Council passed a motion to reexamine a potential corporation in December of 2020 through a feasibility report

The report, presented to council by Ernst & Young partner Tim Philpotts and city utilities and environment director Kate Polkovsky, projected the city would make about $1.6 million in dividends back over 12 years if it funded the corporation and continued to reinvest 80 per cent of revenue annually. 

The city's recently proposed 15-megawatt Badger Lands (the 72 acres of city-owned land north of Villeneuve Road) solar farm would be the energy corporation's primary revenue stream, and it would account for more than half of the MEC's projected total revenue over 30 years.

Other revenue streams outlined in the report included Level 3 electric vehicle charging stations (high-speed stations that fully charge a car in 30 minutes), rooftop solar panels, and consulting services for energy-efficiency incentive programs such as the Clean Energy Incentive Program (CEIP). 

When asked by Mayor Cathy Heron why the feasibility report didn't include the potential of a waste-to-energy plant, Polkovsky said more data was needed to include it in detail. 

"Do I think it will be part of the business case in the future if we have the data? You bet," Polkovsky said. 

In discussing the assessed risks of the corporation, Philpotts highlighted there we be a need for a "strong and diverse" board of directors and management of the corporation. Some other key risks identified in the report included the challenge of attracting the right partnerships, what capital the corporation could generate independent from the city, and pre-existing competition in the renewable energy market. 

Philpotts said the creation of a business case would provide an opportunity to strategize about ways to mitigate the risks. He concluded by saying that the MUC is a "good opportunity for increased resiliency" of the city's revenues. 

Councillor criticizes report

Coun. Sheena Hughes said she had "serious doubts" about the numbers in the report, arguing that they didn't express enough growth to justify the cost of opening an MEC. She highlighted how the Badger Lands solar farm had promised much higher revenue from the onset, $200,000 of which would be made in the first year alone. 

"I hope to God that we really think about whether or not we're acting out of desperation or realism," Hughes said. "I expected the feasibility report to realistically show me that it would make money, and that it would be worth the effort."

She said that, according to the report, the average taxpayer would only save between $1 and $4 off their annual bill in four years' time. 

"If you can show me numbers that work, I will be all over it," she said. "But when I see assumptions that don’t reflect reality, I can't support them."

Coun. Ray Watkins said he shared Hughes's concerns about the numbers, but that he would prefer council proceed with a more detailed business plan. 

"The reason why I'm going down this path, albeit with a bit of trepidation, is because we don't really have a lot of alternatives," Watkins said. 

He noted that the MEC could help the city avoid undesirable outcomes, such as reducing available services or increasing taxes, and said allowing the corporation to oversee certain energy projects would facilitate more efficiency than a municipality. 

"You might say we don't need an MEC to do this, but I beg to differ, because look how much time it's taken us just to get to here," he said. 

Looking to the future

Kevin Scoble, the city's chief administrative officer, argued that investing money in the corporation could be a long-term strategy that would lead to growth in the future. 

"If you want, you can have a cash cow right from day one and set the dividends at 100 per cent, but you'll never see growth," Scoble said. 

Hughes told administration she was "still trying to grasp" why the MEC was necessary, highlighting the expenses that would come with hiring a full board of directors. 

Heron said the answer was more related to "philosophy on how to approach a municipality" than a question administration could effectively answer. 

"Don't focus on what's just in front of you now," Heron said. "Focus on the possibility of expansion ... In the future the MEC's solar farms could be all over Alberta ... I need that council in 2050 to look back at us and say that what we did was brave, and that because of this corporation they're bringing in dividends."

Watkins seconded Heron, agreeing that the decision was about looking toward the city's future.

"To fear-monger and say, 'We're going to do this and we're going to lose all this money,' isn't an option," Watkins said. "There's potential here to build something big and take some money for our city and our residents ... It's shortsighted not to take the next step."

He said that 25 years ago, an investment in solar energy would have seemed ridiculous.

"Today, though, people aren't saying it's crazy. They're asking how they can invest," Watkins said. "We owe it to our citizens, our staff, and everyone, to take this step further and see if it's going to work."

The vote passed by a majority, with councillor Hughes opposed. A more detailed business plan for the MEC will be brought forward to the next council in 2022.