CANMORE – The Town of Canmore will renegotiate its contract with Epcor to manage its municipal water and wastewater utilities after an independent review of the legal agreement that was originally signed in 2010.
The review, conducted by NAD Consulting Inc., found that language in the contract favoured the company and recommended the municipality address that issue, among others, with a new agreement.
Manager of public works Andreas Comeau presented the findings to council at its July regular business meeting and recommended that council direct administration to negotiate a new water and wastewater service agreement with Epcor Water Services Inc.
"They felt the agreement itself was quite complex and they could appreciate it would be difficult to administer and not easily adaptable to change," Comeau said. "The agreement, they also felt, did not reflect necessarily, or promote a balanced relationship.
"To be frank, when we negotiated this 2010 agreement, at the time the Town had three resources available to do it, but Epcor had much larger resources available to them. For that reason, we allowed them to write the agreement, which was generally approved by both parties.
"But it looks like the flavour is more balanced towards Epcor as noted by the consultant."
Mayor John Borrowman supported the motion, saying it is work that council would like to see accomplished during its term.
"This is a really detailed report," Borrowman said. "I feel very confident as a member of council to be able to move forward because of the detailed and exhaustive analysis they have provided the Town of Canmore."
The mayor said it is critical for the community, municipality, council and administration to feel confident it is getting a high standard of service delivery at the best price.
"This conversation, this work that we are engaging in now, is really important," he said. "Water and wastewater is one one of the most important services we are able to provide for our residents and visitors."
Comeau said administration is looking at establishing an internal committee with the expertise needed to negotiate contracts like this one and he expects the upcoming process to be undertaken with more municipal resources than last time.
Comeau said the municipality has a good working relationship with the company. Epcor was originally contracted in 2000 to manage the utility, with a second contract signed in 2010, which had an option to extend its terms to 2030.
"Epcor is out there, I trust they are out there working diligently to manage repairs and provide services to customers in a timely fashion," he said. "It is a very strong relationship and I would say I know Epcor works very hard to make sure our relationship is healthy."
However, even with a good working relationship, after 20 years, a comprehensive review of the contract was requested by council.
NAD Consulting reviewed the agreement, conducted a performance and best practice assessment, and service delivery option analysis before providing recommendations.
The recommendations included that the contract needs better defined fees for services, strengthening of internal controls and oversight, and adjustments to several services in the agreement to better meet expectations.
"We need to be a bit more clear in the language about what the expectations are, so it is easier if Epcor is not meeting that part of the agreement, we can point to it with specifics," Comeau said.
The assessment of the company's delivery of the service found it has strong organizational support, skilled resources and uses leading practices.
"They know the system, even though the Town of Canmore owns it, they know how it works much more than we do," Comeau said. "They are very involved with the facility, how it works and have a strong relationship with the regulator."
He also pointed to Epcor's quick response to emergency situations, like the 2013 flood, and the ability to access additional resources within the company if needed.
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However, Comeau told council a recent request by Epcor to increase its contracted service fee by $840,000 – a 25 per cent hike – raised concerns and supports the need to review the relationship between the two parties. In 2019, council approved an increase of $405,000 to the basic fee for 2020.
He said there have been ongoing challenges with capital cost estimates in the utility budget that when tendered come in over budget, as well as with spikes in the operational costs like the most recent request.
"After 20 years, when we get a request like this, it is certainly the time to take a look at that and complete a review," Comeau said.
As for unexpected increases to capital budgets after they are approved, Comeau subsequently presented a request to council at the same meeting to change the 2020 south Bow River loop water main project due to all bids exceeding the $4.2 million tender earlier this year.
Comeau said over the last 10 years, the Town of Canmore has paid Epcor $75 million to deliver a number of programs. That includes $26 million for the operation of the water and wastewater systems, $28 million in capital projects, $9 million for a rehabilitation fund, $3.73 million for biosolids management, as well as the costs for work that is outside the scope of the contract, power and equipment costs.
The water and wastewater utilities are funded through fees paid for the services by residents and businesses in the community. Because it is completely supported through utility rates, no property taxes are spent on its operational or capital budgets.
"If we are unsuccessful to renegotiate a new agreement that is balanced and beneficial to both Epcor and the Town of Canmore, then the recommendation is to go back out to market," Comeau said.
The 2019 operating budget for the water utility was $10.7 million, with $4.9 million in contracted services to Epcor, $812,000 in supplies and energy costs, $1.9 million in interest payments on borrowing for utility projects, and $2.6 million transfer to reserves.
The 2019 capital budget for water services, delivered by Epcor on behalf of the Town of Canmore, totalled $7.5 million for 13 projects ranging from a lift station replacement to design work.
