Penticton city council has approved a deal with FortisBC to upgrade the Westminster substation, but not before some councillors expressed their concern it still includes an additional $550,000 fee on top of construction costs.
Fortis called it a commercial compensation fee when they informed the city, in January, they were adding it to the nearly $5 million price tag of the upgrade, settled on after two years of negotiations and preliminary planning for the project.
Dennis Swanson, director of regulatory affairs with FortisBC, explained the markup shows that the company is not trying to undercut local contractors and is exercising its primary responsibility to focus on projects of benefit to its own customers.
Originally, the fee was set at $750,000, but Mitch Moroziuk, director of operations for Penticton, said they were able to negotiate a lower fee.
The eleventh hour addition of a commercial fee didn’t sit well with councillors when they were informed of it in January, and several expressed their continuing discomfort.
“I don’t think this is right. $750,000 was too much and so is $550,000,” said Coun. Helena Konanz, who was the only councillor to vote against going ahead with the deal, adding that it wouldn’t be the last time Fortis would ask for such a fee. “I think we are putting ourselves in a precarious position by doing this.”
Konanz felt it would be better to wait another year or so and work on the city’s relationship with Fortis, arguing that chances of a catastrophic power outage, which the upgrade is intended to prevent, are slim.
A 2011 electrical distribution system plan identified required upgrades to the city’s electric utility, including installation of a 12 kilovolt transformer at the FortisBC Westminster Substation. The project would increase system security by allowing more flexibility to transfer electrical loads between substations in the event of an emergency.
Moroziuk said they took the increased risk to the electrical utility’s customers that would be caused by a delay in moving forward with this project, as well as the likelihood of success arguing the fee before the B.C. Utilities commission or in the courts, before recommending the city go ahead with the deal.
Coun. Andrew Jakubeit admitted to having “a bitter taste” in his mouth regarding the Fortis fee, but said the city needed to move ahead, as did Coun. Wes Hopkin.
“This is a somewhat unfortunate resolution to this issue in my opinion. I still maintain it is somewhat of an unjust levy they are putting on us,” said Hopkin. But though he said the city was being taken advantage of, council needed to move forward and do what is best for the electric utility.
The agreement outlines the terms around the purchase of a $4,967,000 transformer — possibly ranging from 10 per cent less to 30 per cent more — plus the $550,000 commercial fee, which is not due until 2015.
The city has been planning for the financial investment for several years, and the funds will come from the city’s electrical reserve account.
Colin Fisher, the city’s chief financial officer, said the project would put a significant drain on the reserves, but there will still be a positive balance in the account, which is expected to recover quickly in the course of the city’s five- year plan.
Moroziuk said work will start on this project with the ordering of the transformer, which should occur in the next few days. It is expected to be complete by Aug. 31, 2015.