News

Why is the Revelstoke Community Energy Corporation exploring privatization?

Revelstoke Community Energy Corporation President David Johnson. - Aaron Orlando/Revelstoke Times Review
Revelstoke Community Energy Corporation President David Johnson.
— image credit: Aaron Orlando/Revelstoke Times Review

Revelstoke Community Energy Corporation president David Johnson’s office is a lot more ‘community’ than it is ‘corporation.’ It’s a medium-sized desk partitioned off inside the Revelstoke Community Forest Corporation’s office. In fact, the administrative wing of the Revelstoke Community Energy Corporation (RCEC) is just a couple of desks located in a wide hallway corridor.

His salary at the corporation is also more ‘community’ than ‘corporation.’ Johnson, a retired university professor, is a volunteer. He studied chemistry at university and eventually moved his way up the ranks at an Ontario university. His speciality eventually evolved into an area of expertise that included things like community energy systems. He retired here (he runs the Minto Manor Bed & Breakfast) and got involved in the district energy system, which has been operating for about seven years now.

It was his passion for alternative energy systems, combined with his expertise, that got him involved with the RCEC start-up.

Now he explains, the system is at capacity and it’s time to again think about the future: “The system has now reached its design capacity.  The build-out of the system has allowed RCEC to enter into a period of financial stability, producing a net positive revenue flow after covering  all of its expenses and loan repayments.  It is anticipated that the Corporation will be in a position to start paying dividends to the City of Revelstoke within five years."

In a 30-minute interview on Mar. 2, Johnson explains the city planning department had completed two plans known as the CEEP and the DEEP (The Community Energy and Emissions Plan and the District Energy Expansion Plan).

They plan for greener energy sources for Revelstoke and an expansion of the existing system -- maybe by extending pipes or, more likely, by establishing satellite energy systems in places like the Trans-Canada Highway corridor or at Revelstoke Mountain Resort, for example.

The problem is getting capital for the expansions. Banks and other traditional lenders are reluctant to lend to utilities because of the long payoff. Johnson says the RCEC board is reluctant to go back to the city to ask for more. The grant funding that was available to a start-up proposal is not as readily available to a going concern, explains Johnson.

So, as reported in the Feb. 29 issue of the Times Review, the corporation is considering options for future “ownership models.” Johnson outlined the proposals in a few possible scenarios:

• The City of Revelstoke maintains 100 per cent ownership, and RCEC remains as is, or to expand, it raises funding through loans and/or grants.

• A defined partnership, which could include either a proportional share ownership based on the investment of the City and external partners, or a split asset arrangement, where in part of the operation, for instance the distribution, be maintained by RCEC and another portion, such as the plant, be purchased by a partner.

• A co-operative ownership model could be considered, wherein the users share the ownership, and the risks.

• The outright sale of all the assets and operations to an outside party would be the opposite end of the spectrum of models from the City retaining full ownership.  In this case all existing contracts would have to be fully respected.

The corporation is moving forward with these scenarios in the coming months. They’re planning to spend $40,000 on a consultant to put together a package soliciting expressions of interest. The RCEC may have the request for expressions of interest ready by the beginning of summer -- although they may choose to wait to early fall.

As Johnson underlines, the RCEC is a source of pride for many Revelstokians. It’s cited as a good example of a district energy system, ahead of its time. So why mess up a good thing? Aren’t private investors just in it for their cut? Wouldn’t it just turn this public asset over into private hands? Johnson looks at it another way. “My overall comment is that it’s really quite exciting to be at this stage in RCEC’s development,” he said. “In that we are faced with the challenges in deciding what’s the best way to go forward. It’s also very exciting because it gives us a time to go and consult again with the industry and with the citizens of Revelstoke once we receive the input that we’re going to be getting.”

He also stressed opportunity for the public to get involved in the process to determine a new ownership model. “Give us your feedback. Give us your input. Because the collective wisdom is generally so much greater than any individuals. This is actually really quite exciting to be taking the energy corporation through this.”

And why the secrecy? Johnson admits documents included in the council agenda in February weren’t supposed to be there -- a clerical error had included it. The minutes of a secret task force assigned the job of exploring ownership models noted the great potential for public backlash, and the need for a public relations campaign. Pretty juicy stuff for a newspaper reporter -- an actual cabal meeting in secret, behind closed doors, conspiring to possibly sell off a public asset, and worrying out loud that the newspaper might catch wind of it.

Johnson explains the decision to hold the meetings in camera was due mostly because the discussions would contain a lot of proprietary information. They wanted those expressing interest in the corporation to present their best plan, not the plan they thought the RCEC was looking for.

In conjunction with this interview, the RCEC issued a media statement about plans for the RCEC expansion. In their own words, here is that media release:

Press Release

Help Decide the Future of the RCEC

The Revelstoke Community Energy Corporation (RCEC) was established by the City of Revelstoke to address a number of important issues in the community.  In its first seven years of operation, the RCEC has achieved many of initial objectives.

One of the major objectives for the RCEC is to have a positive impact on the environment of the area.  With the strong industrial partner of Downie Timber Mills, who committed to provide the fuel for the energy system, the RCEC contributed to the elimination of the Oliveen burner at the mill, and significant improvement in the air quality was achieved.  Long before the Provincial Government mandated communities and public bodies, such as School Districts, reduce their Green House Gas (GHG) emissions, Revelstoke and School District #19 were doing it by connecting to RCEC.  Overall, RCEC’s GHG reduction is about 3,400 tonnes annually, the equivalent of taking 650 cars off the road.

The RCEC has constructed the district energy system to deliver thermal energy in the form of steam to the Downie Timber kilns, and hot water to the larger buildings in downtown Revelstoke.  The system has now reached its design capacity.  The build-out of the system has allowed RCEC to enter into a period of financial stability, producing a net positive revenue flow after covering  all of its expenses and loan repayments.  It is anticipated that the Corporation will be in a position to start paying dividends to the City of Revelstoke within five years.

RCEC continues to provide stable, lower cost thermal energy to all its customers, and reduces or eliminates their costs for boiler maintenance and replacement.  Energy costs are known and fixed for the terms of the customers’ contracts, so they can budget their expenses more accurately.   Also, the money spent on RCEC heat, stays in Revelstoke.

Being at the design capacity, RCEC is now in looking forward to possible expansion and optimization of the district energy system.  Working with the City of Revelstoke on its Community Energy and Emissions Plan (CEEP), and with the associated District Energy Expansion Plan (DEEP), the RCEC determined that there are good possibilities for the expansion of the contribution that district energy plays in the energy future of Revelstoke.   However, funding is required to create either satellite plants or expand the present facility.

There are several ways to acquire the requisite funding.  First, there is borrowing the required funds, which is subject to all the usual risks, including lenders being reluctant to support projects, such as utilities, that have longer payback periods than most lost loans.

Second, the RCEC could enter into some form of partnership with an outside party who provides the funding.  As we need to determine the possible interest in this, and the scope of such interest, the RCEC is about to launch a “Request For Proposals” to engage consultants that will help guide us through the complexities of determining the options that exist in the marketplace that will permit the continuing expansion of district energy in Revelstoke.

There are a wide range of options that might be put forth to help RCEC achieve its goals.  The options may be referred to as various “ownership models”.  These models cover a range of approaches, and could include any one, or some combination of the following:

  • The City of Revelstoke maintains 100% ownership, and RCEC remains as is, or to expand, it raises funding through loans and/or grants.
  • A defined partnership, which could include either a proportional share ownership based on the investment of the City and external partners, or a split asset arrangement, where in part of the operation, for instance the distribution, be maintained by RCEC and another portion, such as the plant, be purchased by a partner.
  • A co-operative ownership model could be considered, wherein the users share the ownership, and the risks.
  • The outright sale of all the assets and operations to an outside party would be the opposite end of the spectrum of models from the City retaining full ownership.  In this case all existing contracts would have to be fully respected.

Each approach has a wide range of pros and cons, and may, or may not, be a realistic reflection of the energy market at the present time.

It is due to the complexities of planning the future of district energy, and the RCEC, that the RCEC Board and City Council has established a joint Task Force to solicit input and make recommendations on the future development of the Revelstoke Community Energy Corporation.

The Task Force will identify a consultant to assist us through the development of a formal “Request for Expressions of Interest” and the evaluation of what is received.  As much of the content of the expressions of interest would be specific, or proprietary, to the companies making the proposals, the details of the range of proposals, are unlikely to be made public.  The Task Force would then make recommendations to the RCEC Board and City Council, and whatever recommendations are made would then be presented to the citizens of Revelstoke prior to any decision being made.

We look forward to discovering what possibilities exist, and then sharing them with you.

David W Johnson

President,  RCEC

Editor's note: This story was edited to delete a paragraph that repeated an extensive quote. The error essentially repeated paragraph four twice. We regret this error.

We encourage an open exchange of ideas on this story's topic, but we ask you to follow our guidelines for respecting community standards. Personal attacks, inappropriate language, and off-topic comments may be removed, and comment privileges revoked, per our Terms of Use. Please see our FAQ if you have questions or concerns about using Facebook to comment.