Power play surprise
Power Corp. disappointed by council's decision

Richard Gleeson
Northern News Services

NNSL (Oct 08/99) - City council passed up an opportunity to cut the cost of living here when it decided not put a power distribution franchise to tender, says the Northwest Territories Power Corporation.

"We were surprised that given the city's financial problems (including bad debts from Royal Oak and a declining population and tax base) the city was not interested in making the effort to explore all options to reduce costs and maximize benefits to its citizens," wrote Power Corp. president and CEO Leon Courneya in a Sept. 27 letter to Mayor Dave Lovell.

Power Corp. spokesperson Bill Braden said the city never invited input from the corporation or informed it they were making a decision on the franchise agreement.

"We didn't get involved in this process until we informally heard about it ourselves," said Braden.

On June 28 council made the decision to negotiate a new agreement with Northland Utilities. Northland holds the current franchise agreement, which expires in 2001.

In hindsight, Coun. Ben McDonald said directing staff to negotiate only with Northland was probably a mistake.

"We probably should have done it on a tender basis," said McDonald, who said he voted with the majority to negotiate a deal with Northland. "We never thought to put it out to tender."

Mayor Dave Lovell said the Power Corp. could have made an offer to help cover the costs -- measured in the tens of thousands of dollars -- associated with putting the franchise to tender.

"If someone is that desperate to tender on it, maybe they should be willing to pay our evaluation costs," said the mayor.

Lovell said it is not too late for council to reconsider its decision but said the city, at least, had missed its chance to take over the utility.

"It's an opportunity that's gone," he said. "(Northland) upgraded it so much that a buyout has become so prohibitive we wouldn't get our money back."

A report prepared by an independent consultant earlier this year pegged the value of Northland's assets at between $22.5 million and $25.5 million. If the city were to take over the franchise it would have to buy Northland's assets.

The city considered exercising a mid-term buyout clause in the franchise agreement in 1997. At that time Power Corp. wanted to get involved in power distribution as an operator or owner/operator or several variations thereof.

The attempted buyout turned ugly. An unwilling seller, Northland said it would fight any attempted takeover in court.

There was a gap of more than $6 million between Northland's evaluation of its assets and an independent consultant's.

In the face of potential costs of more than $200,000 to resolve the issue and public criticism for considering a venture into the private sector, the city backed off.