City seeks partner for treatment plant

By Geoff Lee

February 25, 2016 9:29 AM

Lloydminster Coun. Linnea Goodhead favours the conceptual idea of creating a Lloydminster Utility Corporation with EPCOR as a strategic partner to fund a new $94 wastewater treatment facility required by Saskatchewan.

EPCOR gets tentative nod

The city of Lloydminster has come up with an out-of-the-box solution to fund and operate a new $94 million wastewater treatment plant and future upgrades.
Council gave the thumbs up Monday to informally adopting an initial business case to create a Lloydminster Utility Corporation with EPCOR as a strategic 50/50 partner to finance the new plant.
“I think it’s a terrific idea,” said Coun. Linnea Goodhand.
A utility corporation is a company that operates separately from a municipality. It provides utility services and recovers costs from customers on a “cost of service” basis. As the business case proceeds, the city will continue to do its due diligence and identify risks of the LUC partnership to determine if they are manageable.
“But as a concept it’s got tremendous value, said Goodhand.
“It allows us to move forward with a very expensive project without putting all that debt on the books and limiting our ability to move forward with other projects.”
The city is also looking to avoid sharp increases in rates for city water and sanitary ratepayers.
“Don’t forget this is regulated utility corporation,” said EPCOR spokesperson Tim le Riche.
“Any rates that will be set will be going through all the normal government regulated processes.”
Under the partnership, EPCOR, which is owned by the city of Edmonton, would be an equity investor in the LUC.
“There are two key strengths that we feel the city of Lloydminster brings to the utility corporation – that is our people and our utility assets,” said Kirk Morrison the city’s deputy CAO.
EPCOR could also bring its capital project expertise to the table to enable the city’s future water and sanitary services as the city grows.
“Right now our focus is on developing the business case further to support the utility corporation,” said Morrison.
“We think that it’s a sound model that meets all of our needs and meets the ratepayers’ needs.”
Saskatchewan has regulated higher effluent standards that come into effect on July 2017 to improve water quality.
Saskatchewan Water Security Agency is giving Lloydminster an extra year to build the plant that the city can’t afford on its own.
“The cost exceeds our ability to fund,” said Morrison, who noted the city has been seeking costing options since last fall in the absence of substantial funding support from higher levels of government.
Available grants from the Building Canada fund and the city’s ability to borrow money leave an $18 million shortfall the LUC would address.
The city received $1.8 billion from Alberta, but no funding from Saskatchewan.
The city can only borrow $76 million of its debt limit of $134 million this year with the remaining $58 needed for other projects.
“Where we need the assistance is really on the financial piece and EPCOR certainly brings that,” said Morrison.
“They’ve got over $1 billion worth of water assets and the financial wherewithal to meet the city’s long term needs.”
The city anticipates that major upgrades to the water treatment plant will also be required by 2027.
Morrison also likes EPCOR’s major capital project experience mentioned during his presentation to council.
EPCOR is currently building a new wastewater facility for the city of Regina and will operate it until 2044.
“We really wanted to work with a strategic partner that has experience in municipalities because it’s a different ball game treating water for human consumption versus water for an industrial application,” he said.
Morrison also likes the fact EPCOR has experience working bi-provincially.
“The city of Lloydminster is in a unique position where our water intake is on the Alberta side of the border and or sewage effluent (waster water discharge) is on the Saskatchewan side,” he said.
“So we have to operate in both regulatory environments and when you bring that factor into play EPCOR really shines as the strongest partner.”
The LUC strategic partnership was presented during the Your Voice public forum Tuesday.
Feedback on the proposal will be brought back to Council at its March 28 meeting along with a revised business case that could be approved this year.
“We still have the opportunity to construct that wastewater treatment plant and the sooner we set up the corporation the better,” said Morrison.
EPCOR’s le Riche added there are a lot of details to be worked out on what assets will go into the LUC.
“Right now we want to make everyone understands the proposal and everyone’s comfortable with the proposal,” he said.

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