Going public
City eyeing Northland purchase, but decision months away

by Nancy Gardiner
Northern News Services

NNSL (Feb 05/97) - The city of Yellowknife is studying the pros and cons of buying the company that distributes the city's electricity.

But neither Northland Utilities nor the Yellowknife Chamber of Commerce president are keen on the idea.

"It goes against Chamber principles and the way of the world, "Gabrielle Decorby, president of the Chamber of Commerce said last week.

Decorby said that if the city does buy Northland, it would be competing with the private sector.

"In a time when the city is privatizing snow removal and street cleaning, and other governments are doing the same," Decorby said, "I don't believe the city should be involved, when other cities are getting out of this stuff."

Mayor Dave Lovell said in a telephone interview Friday that "Northland is a very good operator and provides very good quality."

"However, the object is to get the very lowest rates in the short and long term."

The city is "not bound and determined to own it," Lovell cautioned. "We need a lot more information before we make a decision."

Lovell admitted some citizens are annoyed and feel the city is wasting money.

And even though he feels it's the city's duty to pursue the evaluation, he's not "locked into the idea."

"At this stage, we're exploring options. I don't want people phoning me when their lights go out. But if it's recommended the city buy it, I'm quite prepared to do it."

Michael Shaw, vice-president of Northland Utilities Enterprises Ltd., meanwhile, opposes the purchase strongly. "We will resist this effort vigorously. The mayor knows that, I've met with him and told him to his face," he said.

Shaw, who is based in Calgary, made a presentation about the proposal at a Chamber luncheon in Yellowknife.

Following his presentation, Shaw explained his company's position in an interview.

Northland has a franchise agreement with Yellowknife which is still in effect. The agreement was taken on by Northland when it bought Centra Power Inc. in September 1991.

The agreement outlines that the city and Northland must agree on a firm doing a valuation of Northland's assets if there is to be a sale.

Both parties agreed that California-based RMI would perform the valuation, even though RMI wasn't Northland's first choice.

RMI came up with a value of $15.7 million, but Northland objected, saying the figure is was low and offering their own estimate of between $18 million and $21 million.

There were two main problems with the valuation process, according to Shaw.

First, it used U.S. cities as a basis for comparison analysis, and second, "they have not addressed the huge safety requirement."

Shaw also took issue with the cost of the valuation, pegged at about $60,000 by Joe Kronstal, director of finance for the city. Shaw said that, taking expenses into account, it's probably closer to $100,000.

The valuation's cost is shared equally borne by the city of Yellowknife and Northland.

"We recover it out of our rates. They city pays for it out of their budget," noted Shaw.

However, even at the higher value, Northland doesn't want to sell, said its vice-president. Utilities are its business and it has been operating at a profit.

Northland has asked for a legal opinion on the valuation price. The city told Northland it would get back to them with theirs, but that meeting hasn't happened yet, said Shaw.

The dispute could go to binding arbitration if the city decides to go ahead with the purchase and Northland challenges the price.

Talks between the city and the utility company about the purchase have been going on for about a year.

If the city has to borrow money, it would have to hold a plebiscite, and Lovell said they city would have to borrow. "This may even become an October election issue," he said.