Presentation to City CouncilSeptember 13, 2005

Don Lowry, President & CEO

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Joint recommendation

In a letter to Council dated May 24, 2005, the City Manager and EPCOR supported the combination of Drainage and Water Services as suggested by the conclusions of the independent study.

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Integration puts people first

People believe water is valuable and vulnerable.• Comprehensive planning for the total water cycle provides

stewardship for a precious resource, and ensures a healthy, sustainable community.

People care about safety, service and cost-effectiveness.• One voice for planning and development input.• Immediate $9 million annual increase to City revenues.• Long-term service and efficiency improvement; City regulation of

rates, service and quality standards.

People want good jobs, growth and opportunity.• New jobs and enhanced career options created by providing

combined services; Edmonton strengthens head-office capability; and creates potential for an expanded Centre of Excellence.

• Existing employees cared for – excellent labour relations record; honour all collective agreements; pensions fully transferable; no lay-offs or buyouts.

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Environment: Integrated Management of the Total Water Cycle

Source: Adapted from a presentation by Los Angeles Power and Water at the 2005 American Water Works Association annual conference.

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People insist on good governance

Governance• Nationally-recognized governance model:

– 2004 Public Sector and Overall National Award in Governance from the Conference Board of Canada/Spencer Stuart.

• Recommended as the single best governance approach for water and drainage by Ontario’s Watertight report:

– “The model where the municipality owns the corporation offers the greatest benefits in terms of governance, transparency, financial sustainability and accountability. This is especially the case where the water system is large…” (Page 33)

2004 National Award in Governance

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People want ownership and control to remain with the City

• City retains 100% ownership of drainage and water; EPCOR can not divest.

• City Council sets rates and performance measures for water service and quality:

– Enforced through a Performance Based Rate– Water has consistently met or exceeded standards– Water rates have been held well below inflation. Since 1996,

the CPI has increased 25% compared to 7% for water rates.• City Council retains rate and performance setting for

Drainage.• City Council retains planning and development control.

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City of Edmonton - Planning & Development Handbook

“The civic administration, chiefly through the Planning and Development Department’s experienced staff, is charged with implementing the City’s planning, development and servicing policies.”Section 2.4, page 10

• Building Permits Planning and Development Department Administered by Development Compliance Branch

• Servicing Agreements Approved by General Manager, Planning & Development Dept. or Executive

Committee• Subdivision Approved by Subdivision Officer or Subdivision Authority

• Rezoning / Road Closures Approved by City Council

• Local Plans (all authorized and approved by City Council)

• Area Structure Plan• Neighbourhood Area Structure Plan• Servicing Concept Design Brief• Area Redevelopment Plan• Corridor/Special Land Use Study

• Municipal Development Plan Approved by City Council

• Development Permits Planning and Development Department Administered by Development Compliance Branch (See Section 3.14 regarding development permits involving Heritage buildings)

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People want assurance of safety, quality and reliability

• EPCOR has a 9-year track record managing Edmonton’s water system; we are a national leader in quality and technology.

• The same Drainage and EPCOR employees will continue to provide service.

• EPCOR has a record of improving and investing in utility service:– Water quality testing has been tripled; we conduct twice as

many tests as required by regulation– Canada’s first large installation of ultraviolet water treatment– The water lab is ISO 17025 certified, and filing for ISO 14001.

• EPCOR has a record of reliable service:– Water main breaks have been reduced to their lowest levels

since the 1960s– During flooding in southern Alberta, drainage systems in

EPCOR communities continued to perform.

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People want good jobs, opportunities for advancement and a strong city

Shared experience of Drainage and Water• EPCOR and Drainage employees both work for entities wholly-

owned by the City of Edmonton.• EPCOR employees today provide billing and customer service for

Drainage.• Shared unions and professional associations; excellent labour

relations record.

New opportunities• Growth will bring new job opportunities to Edmonton, and increase

cross-training and career options.• Growth will contribute to head-office strength, building a

community of contractors, services and suppliers.• Potential to expand the scope of the Centre of Excellence.

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Summary

Integration means:• A healthy, environmentally-sustainable city• New opportunities for people, job creation and fair

treatment for existing employees• Residents see planning, rates, service and quality

protected under City ownership and regulation, while benefiting from a more cost-effective structure

• There is an effective plan to mitigate transitional issues and a nine-year record of success with Water

• Edmonton as a world-class Centre of Excellence in water, wastewater and waste management.

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Next Steps

• If approved:– Employee and stakeholder communication update

immediately– Prepare master agreement by March 31, 2006– Integration plan by June 2006– Complete integration Fall 2006.

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Appendix

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Financial benefit to residents

122.6

137.5

5.06

100

110

120

130

140

Current Structure Integrated Structure

DrainageEPCOR

• $9 M annual increase to total City revenue due to application of EPCOR dividend policy.

• Income does not result from rate, staffing or capital investment changes.

Annual dividend revenue (millions) to City of Edmonton by source, based on current versus integrated governance model.

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The City of EdmontonElectorate

City Council

Community Services Committee Office of the City Auditor

Executive Committee EPCOR Utilities Inc. *

Transportation &Public Works Committee

Police Commission

Other Committees Edmonton Public Library Board

Other Commissions, Agencies, Authorities, Boards City Manager

Intergovernmental Affairs Office of the City Clerk

Asset Management & Public Works Emergency Response

Community Services Planning & Development

Corporate Services Transportation & Streets

Regulator

EPCOR Water &EPCOR Drainage

Drainage Branch

* A wholly owned subsidiary

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Opportunities for growth

• Currently upgrading, building or managing 12 wastewater facilities/systems outside Edmonton.

• New commercial growth opportunities increasing:– Victoria, Fort McMurray and Ontario.

• Growth outside Edmonton is the backbone of EPCOR’s long-term plan; integration creates a competitive provider to large municipalities:

– PwC projects $22-82 M NPV of new ten-year cash flow– Growth water business has already delivered $22 million in

new annual revenue.

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Reasons for confidence

• Experience with Water Services since 1996:– Service, quality, rates, governance.

• Direction provided by Alberta’s Water for Life strategy and Ontario’s Expert Panel Report on water and wastewater systems.

• Joint recommendation; unanimous support of the Board.• Independent study overseen by a Fairness Commissioner,

accompanied by a mitigation strategy.