The pending sale of AltaLink to U.S. owned Berkshire Hathaway has become of great concern to many of the constituents of Drumheller Stettler. My colleague and fellow member of the Legislative Assembly, Joe Anglin published an editorial that explains the proposed deal.
Sale of AltaLink to U.S. firm bad for ratepayers
AltaLink is a publicly funded fully regulated utility that is owned by a highly disreputable corporation: SNC-Lavalin.
AltaLink also just happens to be Alberta’s largest electricity transmission company that controls 80 per cent of the electricity flow in Alberta. Albertans guarantee AltaLink an annual income of roughly nine per cent return on equity (ROE), and we pay for all the capital improvements to the company via a transmission charge levied on every monthly electric utility bill. By law AltaLink doesn’t pay any taxes.
Given SNC-Lavalin’s poor reputation, (they suffer multiple sanctions by the World Bank for fraud and corruption), it seems only fair to Alberta’s ratepayers that another owner with a higher calibre of integrity operates AltaLink.
That said SNC is proposing to sell AltaLink for $3.2 billion to MidAmerican Energy, a U.S. company owned by billionaire Warren Buffett. Both the Canadian government and the Alberta Utilities Commission must approve the sale, and on July 25 the Canadian government approved the sale.
SNC purchased AltaLink for $800 million back in 2002 and if the AUC approves the sale it would, in effect, provide SNC-Lavalin with a $2.4 billion profit at the public’s expense, and this is incredibly unfair to all Albertans on multiple levels.
Without delving into the question of why a public regulated utility should be privately owned, the sale of AltaLink raises numerous questions that must be answered before any sale is approved.
By all guesstimates Warren Buffett is overpaying for AltaLink by as much as $600 million. Executives from both companies refuse to say how this premium is going to be recouped, but I guess we all know the answer: Ratepayers. Over-paying may be in the best interest of SNC-Lavalin, but is overpaying in the best interest of Alberta ratepayers?
Given that Alberta’s ratepayers are the primary (if not sole) capital investors in AltaLink, how do we get a return for our investment?
Typically in other jurisdictions, SNC would only receive a percentage of the profits (or loss) based on the market value of its investment, and the public would receive a percentage of the profits (or loss) based on our investment.
Any premium paid over and above the adjusted present net book value would be returned to the ratepayers.
The formula varies from jurisdiction to jurisdiction, but for the most part it is fair. So why in Alberta does SNC-Lavalin get all the profits from the sale of AltaLink if the ratepayers have paid for all the capital improvements?
The sale of AltaLink raises other concerns with regard to competition and security. AltaLink owns transmission lines that have been deemed critical to our economy.
Does it make sense to sell critical infrastructure to our economy to a foreign company? Does it makes sense that we will guarantee an income to a foreign company that will not pay taxes in Alberta, and pay for all their capital upgrades as well? Further, given that MidAmerican Energy owns numerous generators and transmission lines in the states, how do the regulators propose to police anti-competitive price manipulation?
The sale of AltaLink is complex, but given that Alberta’s ratepayers are the primary investors in this deal, the current proposal to sell AltaLink to MidAmerican should be denied on the premise that this is a very bad deal for the rate paying public.
No private investor would ever invest in a project or business and not expect a return for that investment. Why should the rate paying public be treated any different?
The solution is to re-tender the sale of AltaLink so that the AUC can evaluate all the proposals. The bidding process should account for foreign tax and other subsidies to create a fair process for Canadian companies. If a foreign company wins the bid, so be it!
But, under no circumstance should a foreign company own infrastructure deemed critical to our economy. If AltaLink is to be owned by a foreign company they should be required to sell the critical infrastructure to a Canadian-owned company. Most importantly, profits from the sale should be allocated based on a formula that is fair and just to all investors.
MLA for Rimbey-Rocky Mountain House-Sundre.