No sale is imminent, though there’s a movement afoot to evaluate the potential value of Enmax, or at least parts of Calgary’s wholly owned utility to generate cash and capacity.

While Postmedia columnist Don Braid delivered a glancing blow on the potential sale of the Versant Power property, it could be the tip of the spear in terms of the desire of some on city council to offload city assets to cover water infrastructure costs, or boost the property tax base.

Calgary Mayor Jeromy Farkas told LWC on March 11 that since his time as a councillor, he’s been opposed to the Enmax ownership of Versant, a regulated utility company in the US state of Maine.

Enmax purchased the Versant unit from Emera Inc back in 2019/2020 for $1.8 billion ($1.29 billion, plus $500 million debt). The company was later embroiled in a political plot to dissolve the company to create a consumer-owned utility called Pine Tree Power.

Enmax had provided $15 million to help a non-profit campaign to oppose that movement.

“I fully understand why the council, at the time, the board, the management, wanted to pursue an opportunity to make money at a greater rate than what might be possible here in Calgary and Alberta, but I remain concerned about the scope creep,” he told LWC.

“It’s very difficult to serve two masters, and when you’re weighing the needs of two different rate bases, two different customer bases and wildly different jurisdictions, it becomes difficult to maintain focus.”

With that said, Farkas said he wants the City of Calgary to maintain control over Enmax. He’s not actively pushing for a sale, he said. Mayor Farkas said that it’s important for Calgary city council to be asking questions around valuation, value for money, and a business case for a demonstrable need for Enmax to continue in a certain segment.

It’s estimated that Versant could be worth as much as $2 billion, and provide a shot in the arm to help pay for mounting costs related to aging water infrastructure.

“I am open to conversations about whether or not all of its assets should be within Enmax or city ownership,” he said.

According to Enmax, Versant Power is a part of their long-term strategy to support stability and reduce risk.

“There has been no discussion at the Board level regarding divesting Versant,” read a response from Alexandra Frison, director of communications and community impact with Enmax.

Water utility takeover

Ward 10 Coun. Andre Chabot said everyone’s entitled to their opinion on the matter of selling Versant Power – or Enmax itself. He believes it would be a mistake.

“It’s a much more profitable portion of the regulated part of the assets that are under the control of Enmax,” he said.  

“So, I mean, it’s just maybe a lack of knowledge from a member of council as far as where the greatest potential of earnings lies within the organization. If we’re talking about getting money from the US coming back into Canada, it’s kind of hard to say no to that.”

As far as opening up the potential for Enmax to take over the water utility, Mayor Farkas said that he committed to adopt the Bearspaw independent review panel’s recommendations in full – that includes spinning off the water utility into a wholly-owned subsidiary, like Enmax.

There’s already been some discussion of the acquisition of Calgary’s water utility by Enmax. The company is already contracted by the City of Calgary to handle water bills for Calgary and area customers.

Mayor Farkas said that it would take time and far more discussion to move that forward.

“The question becomes, if it is a municipally controlled corporation, how do we manage that transition in a way that’s fair to ratepayers, fair to existing staff, so that it’s done in a way that doesn’t create redundancy or overly duplicate the necessary services or enabling infrastructure.”

He said that setting up a new entity would require a large investment in overhead, including new systems, infrastructure and branding.

“So, I do think that Enmax poses an interesting opportunity to be able to address that need for the arm’s length accountability, while also building on their record of success and their operational expertise,” he said.

Enmax told LWC they are well-positioned to operate water services and welcomes the opportunity to work with the City of Calgary to examine the acquisition.

“Water aligns with Enmax’s regulated utility growth strategy,” read Frison’s response.

“We have proven expertise in operating and maintaining critical infrastructure in Calgary and with this, our priority will be to bring our expertise, capabilities and resources to support any constructive conversations.”

Beyond Enmax

While Enmax is by far the largest wholly owned asset of the City of Calgary, LWC has learned there’s been some discussion that other asset operations, like Calgary Housing, are being discussed as potential units that could have private sector value.

In this case, the valuation or exploration of a sale of those assets to private entities would make it eligible to have property taxes assessed against it. There’s also some discussion of pursuing a clearer mixed-market model where some units could be rented at market rates to subsidize below-market units. 

None of this has been decided upon.

Mayor Farkas said the City of Calgary regularly examines its assets and works in partnership with the private sector to deliver affordable housing. He said there’s been a considerable amount of city-owned land that’s been made available to non-profit and private partners to create affordable housing.

As far as opening up the sale of Calgary Housing assets, Farkas said that they need to make sure that this housing remains affordable. He said partnering with the private sector is important, but it needs to be done in a thoughtful way.

“I don’t see a private business case to provide below-market housing. There’s not a private entity that could take over Calgary Housing and deliver at a greater quality and a lower price point than us as a municipally controlled corporation, mostly because we don’t have that profit motive in mind,” he said.

Ward 5 Coun. Raj Dhaliwal questioned the business validity of moving forward with any wholly-owned company asset sales.

“Where does it stop? For how long can we go forward and start paying off our liabilities from the assets that are making money for us?” Dhaliwal said.

“Maybe they’re not making the return we are asking. That’s a different discussion. What comes next, that we’re going to sell off our, I don’t know, sell off our other assets to pay for pavement quality. It’s a game. It’s poor governance, which is the easy way out.”

Ward 8 Coun. Nathan Schmidt said that if there are other assets, like Versant or Calgary Housing, the public benefit has to be considered.

“If we’re going to discuss a sale of a group like Calgary Housing, which I am not aware that we’re even doing at this point, but we need to look at the public benefit that’s being provided and whether or not that public benefit can still be provided, which is where my mind goes as well when we talk about the water utility going to Enmax,” he said.

“The last thing that we want to see in the world is the privatization of water, not saying that that will happen in that case, but that is the first step towards that, which is why we need to do our due diligence, because there are long-term consequences to decisions we make like that.”