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From the Councillor's Office
Sempra Looking for "Double Whammy"
Thursday, January 20/2000)-- The American conglomerate that wants to pipe Sable natural gas to Nova Scotia communities may have "low-balled" its delivery price to win the distribution rights-- and now it wants the province's municipalities to subsidize its real costs.
In addition, the U.S. corporation wants to pay less than other Nova Scotia businesses in municipal fees.
These comments today from Councillor Stephen Adams, chair of H-R-M's Sable Gas Committee, and Duart MacAulay, president of the Union of Nova Scotia Municipalities.
Councillor Adams suggested that Sempra Atlantic Gas, of California, may have set its delivery price low enough to edge out its only other competitor for natural gas distribution rights-- the Irving family-backed Maritimes NRG-- and now it expects Nova Scotia municipalities to accept less in franchising fees "so it can still make its high level of profit for its shareholders."
The Councillor said " This is not the same company that came to Nova Scotia a few years ago, ready to accommodate anyone at any time. It knew how much money it wanted to take out of Nova Scotia every year and now it wants the municipalities to make up the difference it had to throw in to win the distribution rights."
UNSM president Duart MacAulay said it was unfair for the municipal property taxpayer to be expected to subsidize the roll-out of natural gas by Sempra across the province.
"Our municipalities will have to contribute a lot of extra time and effort to bring this brand new fuel distribution system into the streets of our communities, so Sempra can conduct its business," Mr. MacAulay said.
Both officials believe the San Diego-based company is looking for a "double-whammy" in Nova Scotia-- "Sempra wants the municipalities to accept less, and to add insult to injury, they want to pay less than other Nova Scotia businesses are paying in municipal fees. They want it both ways."
HRM and UNSM expressed their disappointment that Sempra was not prepared to accept a recent compromise offer from the municipalities, or offer anything new in terms of a financial arrangement over the past number of months.
Councillor Adams said " We feel a little bit like David and Goliath-- and Goliath hasn't moved a step in months: he just keeps saying he will take us to the Utility and Review Board."
The Halifax Region joined other provincial municipalities in developing a single-model agreement with Sempra so that all would receive the same in franchising fees from the American distributor.
The joint municipal position was developed after considering rates in other Canadian municipalities, particularly those in Alberta. The HRM-proposed figure of 7 per cent of gross annual transportation revenues was, in fact, less than what had been recommended by consultants KPMG after reviewing other municipal experience with natural gas. HRM has indicated, in an effort to support other Nova Scotia municipalities, its willingness to negotiate this figure.
The Sempra offer remains unchanged, although municipalities served notice last year at the URB hearings on gas distribution rights that the treatment accorded them in the proponents' proposals was inadequate, based on other examples introduced into evidence.
The Sempra offer would give municipalities one per cent of the net transportation revenues, and 0.75 per cent of the net value of its pipeline network-less depreciation--- in a 10-year agreement.
The company is offering the municipalities similar dollars over the 10-year period proposed, but in altering the pay-out, it seeks to leave the municipalities in a weaker financial position in ensuing years.
Nova Scotia municipalities have already indicated they would consider giving Sempra a break in the first 10 years of the agreement, when its capital and other costs were highest. However, they say the ensuing 10 years would be mostly straight profit for the company and the municipalities felt they should have a "fair share" in light of continuing infrastructure costs they would be bearing as a result of natural gas distribution and similar requirements imposed on existing utility-type operations in Nova Scotia.
Mr. MacAulay said " We don't want a lot more in dollars over the first 10 years than Sempra has offered, but they won't respect our need to be in a strong bargaining position to start the next 10 years of their franchise.
"This is where their California issues seem to be more important that what we do here for Nova Scotian taxpayers. Sempra seems to want to 'divide and conquer' among our municipalities, but UNSM members have demonstrated considerable solidarity on this important issue," he said.
HRM and UNSM say they are willing to meet Sempra officials "anywhere, any
time" in an effort to reach a mutual agreement.
If the sides cannot reach an agreement on municipal fees, the matter will be referred back to the Nova Scotia Utility and Review Board for adjudication.
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Councillor Stephen Adams
Chair, HRM Sable Gas Committee
President, Union of Nova Scotia Municipalities