+ RMA Rural Municipalities
of Alberta

Resolution 6-03F

Support for Rural Electrification Associations

January 1, 2003
Expiry Date:
December 1, 2006
Active Status:
Vote Results:

WHEREAS municipalities are responsible for representing the interests of their municipal constituents who are rural Albertans, and are committed to excellence in meeting the diverse and changing needs of their ratepayers; AND WHEREAS Rural Electrification Association (REA) members are rural Albertans; AND WHEREAS REAs are facing legislative changes and possible regulatory oversight by the Alberta Energy and Utilities Board (AEUB); AND WHEREAS one legislative change relates to the Regulated Default Supply Regulation that mandates REAs (as owners of their distribution systems) to provide the default supply of energy by way of a flow-through rate, which exposes consumers to the volatile power pool market rate; AND WHEREAS one legislative change relates to the Distribution Tariff Regulation that provides for retailer exemptions from financial security requirements such that certain retailers are not required to supply a security deposit to REAs; AND WHEREAS one legislative change relates to the Roles, Relationships and Responsibilities Regulation that limits REAs from determining eligibility for their membership; AND WHEREAS the AEUB rejected an REAs decision, duly determined by its membership at a special general meeting, to amalgamate with other REAs;

Operative Clause:

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request the Government of Alberta to revise the Regulated Default Supply Regulation, the Distribution Tariff Regulation and the Roles, Relationships and Responsibilities Regulation to reduce or eliminate the negative impact these regulations have on rural Albertans; AND FURTHER BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request the Government of Alberta to support the regulatory jurisdiction of REAs boards of directors in decision-making matters of those associations.

Member Background:

The Alberta government recently made changes to the Electric Utilities Act and related regulations. This legislation regulates the electricity industry in Alberta. REAs have presented numerous position papers and attended several meetings both with Department of Energy administrators and officials. Meetings with the Minister of Energy and Deputy Minister of Energy gave REAs the distinct impression that rural Albertans concerns were heard and that revisions to legislation would be undertaken so that REAs would be left whole. Despite these assurances, three (3) regulations were passed in June 2003 that pose significant concerns for the rural community.1. Regulated Default Supply RegulationDefault Supply Regulation passed June 2003: As of January 1, 2006, REAs (as owners of their distribution systems) must provide only a flow-through rate to their members. REA position: REAs may 1) provide the Regulated Default Supply (energy supply to consumers who have not contracted with an energy retailer) of energy to their members as determined by their memberships based on a two-thirds majority of the membership voting, or 2) allow the REAs to be self-retailers and to supply the Regulated Default Supply through hedged contracts, or 3) a hybrid of options 1 or 2.2. Distribution Tariff RegulationDistribution Tariff Regulation passed June 2003: Energy retailers with a credit rating of BBB+ or better receive an adjustment to security deposits required by REAs. These adjustments reduce what an REA would otherwise be entitled to seek for security. The reductions range from $10 million to $25 million. This effectively eliminates providing any security to REAs (as owners of their systems). Further, energy retailers control the billing envelope previously controlled by the REAs and used to communicate with, inform and educate members. REA position: 1) There should be no retailer reduction in financial security required by REAs, or 2) a two-bill model should be used where the REA bills and collects for use, operation and maintenance of its electric distribution system, and the retailer bills and collects for its charges, or 3) a combination of options 1 or 2.3. Roles, Relationships and Responsibilities RegulationBackground Information: REA membership eligibility is defined in the Rural Utilities Act as any person 16 years of age or older and having an interest in land. Limitations of that broad legislated definition have been negotiated or arbitrated since 1948 with interconnected distribution system owners. As the rural landscapes have evolved, so have the REA membership definitions. REAs have recently arbitrated new 2003 contracts with other interconnected distribution system owners. Both contracts referred to membership eligibility based on the assumption that REAs would be able to continue to negotiate, arbitrate, or rely on the broad Rural Utilities Act membership definition. That assumption was reasonable, given the assurances of the REA Task Force. The Roles, Relationships and Responsibilities Regulation which directly and solely impacted REAs was not discussed with REAs and the REAs were not afforded an opportunity to consult on these matters until after the regulation was in its final stages.Roles, Relationships and Responsibilities Regulation passed June 2003: There is an absolute prohibition against using any dispute resolution process to redefine membership. Membership definitions previously agreed to between interconnected distribution owners become the default definition unless both parties agree.REA position: REAs may renegotiate, arbitrate, or rely on the Rural Utilities Act regarding membership eligibility as the need and changing rural landscape requires.4. Alberta Energy and Utilities Board – Application Decision No. 2003-048 Battle River, Fenn, Fort, Central Community AmalgamationBackground Information: The Fenn REA is located in one distribution service area and the other REAs are located in another distribution service area. Battle River REA applied to the AEUB to consolidate and operate the existing electric distribution systems of those REAs. The AEUB was provided with evidence that over a period of six years, the Fenn REA board of directors investigated amalgamation and other options available to it. Amalgamation was chosen as the best option and evidence presented showed the detailed process and steps taken by the Fenn REA to ensure the membership was fully informed and able to reasonably decide this issue, including the board of directors awareness regarding due diligence. It was the due diligence which motivated these REAs to amalgamate and become viable utilities; the boards of directors are acutely aware they must also be duly diligent when they run the operations themselves. The actions the Fenn board had taken were carefully scrutinized by a representative of the Director of Rural Utilities and the meeting was held in accordance with regulations setting out the process.Other evidence was provided about democratic rights of members, and the public interest in safeguarding association governance and member rights. The Fenn board took its regulatory responsibilities and jurisdiction seriously and spent time investigating all available options, providing details to its membership. Concern was raised regarding the cost to the association of dissenting members being able to intervene at AEUB hearings.AEUB Decision: The AEUB approved the application to consolidate and operate the existing electric distribution systems of Battle River, Central Community, and Fort REAs as a single distribution system because it was in the public interest andthe expanded Battle River service area can be served in a manner that provides for the safe and reliable distribution of electric energy for all interested parties. The board did not approve the amalgamation with Fenn REA.REA Position: REAs (like municipal districts and counties) are regulated (governed) by elected boards of directors, and should not be subject to investor-owned utility regulators such as the AEUB.

RMA Background:

The AAMDC has no resolutions currently in effect with respect to this issue.

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