Calgary-owned Enmax squanders millions

Mayor must answer for lost money, says Jenkins

Press release, October 13

CALGARY - The mayor owes Calgary taxpayers an explanation over his support of Enmax’s decision to sell power below market value to consumers outside the city of Calgary, a decision which has cost taxpayers hundreds of millions of dollars, says mayoralty contender Sandy Jenkins.

Enmax sells electricity to its customers in Edmonton for 8 cents a kw/hour. The current competitive price is above 10 cents a kw/hour, and Dave Bronconnier was quoted recently as noting that 8 cents a kw/hour was ‘significantly lower’ than the market price.

“Why is the mayor permitting Enmax to continue with this irrational pricing scheme?” asks Jenkins, who is challenging for the office of mayor on October 15th. “Why are Calgarians subsidizing power rates for customers outside the city limits?”

Enmax has been contracting electricity since the 2001 auction of Power Purchase Agreements (PPAs) in Alberta following electrical deregulation set forth by the Klein government. As there was little participation in this auction, Enmax Energy was able to obtain the Keephills PPA at an extremely low cost of $241 million over 20 years. The result of this is that Enmax could earn a substantial profit if they had sold electricity at market value.

However, according to Aidan Hollis, an associate professor of economics at the University of Calgary, Enmax has been forfeiting its potential profits made through the Keephills PPA by undercutting its competition in order to increase market share, with no guarantee of a sizable return. This is an extremely risky strategy for any electrical commodities trader to conduct, let alone one whose shareholders are taxpayers of the city of Calgary.

In his 2006 paper, The City of Calgary’s Ownership of Enmax Energy Corporation: Value at Risk (which can be found at http://www.iapr.ca), Hollis indicates that the potential profit of Enmax could have been a total of $778 million between the years 2001 and 2005 had electricity been sold at market value. Considering Mayor Bronconnier notes that Calgary had received $50 million in dividends per year from Enmax in that time, including $30 million derived through its distribution system, there has been potentially hundreds of millions of dollars which could have been utilized by the city for infrastructure and operating expenses, or to lower the tax rates for residents or businesses.

Much of this lost profit is due to Enmax artificially reducing power prices for its Calgary customers, a fact Mayor Bronconnier uses to continue his support for this venture. However, Enmax also subsidizes power bills for its customers in Edmonton, Lethbridge and Red Deer, and the subsidies extend to industry contracts, including contracts with the federal government.

“Calgary taxpayers would be livid if they knew they were subsidizing power for the federal government and Edmonton residents simply because the mayor is using Enmax as a tool to boost his political interests,” says Jenkins.

“It takes a lot of gall for Bronconnier to throw a public tantrum over infrastructure payments from the provincial government while the city loses out on hundreds of millions of dollars due to his own decision to keep Enmax over a political principle. He must be held accountable to the taxpayers of Calgary and explain his actions.”

If elected mayor, Sandy Jenkins will advocate a review of Enmax which will include discussions on whether the city of Calgary ought to be selling power below market value to customers outside the city. He will also question why the city of Calgary is involved in the volatile electricity commodity trading business at all.

“Taxpayer dollars are a sacred trust and should not be put at such risk,” says Jenkins. “The only person who is benefitting from these squandered Enmax millions is Dave Bronconnier, and he should be held responsible.”

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