City of Revelstoke company owes millions

With the proposed propane subsidy, mayor said RCEC won’t be able to compete

Despite Revelstoke Community Energy Corporation already owing millions, a proposed propane subsidy has now raised concerns for the corporation’s future.

In September, Revelstoke Mayor Gary Sulz sent a letter to intervene in Fortis BC’s proposed rate change. His letter stated Revelstoke Community Energy Corporation (RCEC) would “no longer be able to compete with subsidized fossil fuel.”

READ MORE: Mixed responses to proposed propane subsidy in Revelstoke

However, Geoff Battersby, former chair of RCEC, said expansion of the company is limited and even if RCEC did entice more customers, profits will always be marginal.

RCEC burns wood residue from Downie Timber and uses a biomass boiler to produce hot water for heating.

As of 2018, the RCEC has unpaid bills totaling more than $2 million from unpaid dividends, loans and long term debts.

Though the City of Revelstoke is the majority shareholder of RCEC, it has not been paid since 2011. The energy corporation owes the city more than $750,000 in dividend earnings.

By comparison, Revelstoke Community Forest Corporation, another city-owned business, paid $600,000 in dividends to the city in 2018 and earned $5.7 million.

Revelstoke Community Energy Corporation burns wood residue from Downie Timber. (Liam Harrap/Revelstoke Review)

The forest corporation loaned RCEC $1.2 million, roughly 15 years ago, to help with construction, but has yet to be repaid.

Since RCEC became operational in 2005 as a $5.3 million ‘heat only’ project, its deficit sits at more than $1 million. However, each year in the last three years it has decreased its long term debt by roughly $100,000 to just under $500,000 in total.

The proposed propane subsidy

FortisBC sent an application to the B.C. Utilities Commission last July, proposing to amalgamate Revelstoke propane rates with natural gas.

That month, natural gas for residential properties was $7.36 per GJ, compared with $13.79 per GJ for propane.

READ MORE: FortisBC proposing rate subsidy for Revelstoke propane users

FortisBC estimates, should the rates be changed, Revelstoke residential customers would see yearly savings averaging $407, $2,100 for small businesses and $48,200 for large commercial users.

According to their application, FortisBC has identified more than 1,000 potential new customers in Revelstoke.

Propane is shipped to Revelstoke via train. (Liam Harrap/Revelstoke Review)

While Sulz, who also sits on RCEC’s board, said he would welcome the subsidy, intervener status gives him the opportunity to ask questions and be a part of the discussions on behalf of RCEC and Revelstokians.

B.C. Utilities Commission should make a decision sometime next year.

READ MORE: PHOTOS: Backyard construction led to propane leak and downtown blackout

The struggles of RCEC

Geoff Battersby, former chairman of the energy corporation, said RCEC is not what was originally envisioned.

“We’ve never enjoyed the cash flow as predicted,” he said. “There have been lots of shortcomings.”

Part of the problem, he said, is economy of scale.

Due to the cost of infrastructure, i.e. highly insulated pipes, it’s not viable for RCEC to provide heat to residential homes, said Larry Marchand, manager of RCEC.

The cost of supplying heat to a single house would be the same as a larger building, thus the return on investment is far higher with larger spaces.

Yearly deficit for Revelstoke Community Energy Corporation
Infogram

Therefore, the company’s customers are big: Downie’s dry kilns, the arena, Revelstoke Secondary School, Begbie View Elementary, Revelstoke Community and Aquatic Centre, St. Francis Catholic Church, city hall, the Revelstoke Federal Building (which houses Parks Canada and Canada Post) and the Col River Manor.

Downie Timber said the partnership with RCEC has reduced its energy bill compared to the cost of propane.

Even if propane is subsidized, many of RCEC’s customers are tied to 20-year contracts. For example, the Revelstoke Secondary School’s (RSS) contract will end in 2032.

When Battersby was chairman, he said they tried to sell the company. FortisBC was interested, but the board did not approve the sale.

Other setbacks for RCEC in the last 14 years include three fires.

The most serious was in 2015. Damages and lost revenue totaled more than $1.6 million, which was covered by insurance. According to the Revelstoke Fire Department, the fire’s cause was undetermined.

READ MORE: UPDATD: Extent of damage at Revelstoke bio-energy plant being investigated

Beyond the money

When it was built, RCEC was the first community energy system in B.C.

Following in Revelstoke’s footsteps, Prince George built a similar system in 2012. However, unlike Revelstoke, Prince George operates it as a utility provider and not as a separate company.

Prince George’s district energy system burns sawmill residue to heat water and pipes it to a dozen municipal and provincial buildings downtown. (City of Prince George website)

Rob Van Adrichem, director of external relations for the City of Prince George, said the facility supports the local economy, improves air quality, revitalizes the downtown core and reduces greenhouse emissions by more than 1,900 tonnes per year.

“It’s the greatest thing this city has done to reduce greenhouse gases.”

Similar to Revelstoke, the system has yet to be profitable.

“It’s a utility. We’re not looking to make money.”

However, Adrichem said its value is beyond economics.

“How much is reducing greenhouse gases worth?”

According to city documents from 2005, RCEC was originally built to reduce fly ash/smoke, generate a local economy and provide stable long-term energy pricing.

The city estimates RCEC displaces more than 45,000 GJ of fossil fuels (propane) and reduces greenhouse gas emissions by 4,000 tonnes annually.

RCEC laid the groundwork for future projects, like the one in Prince George, said Adrichem.

While RCEC might not be enjoying economic success, said Adrichem, it’s still inspiring other cities to rethink how to create energy and dispose of waste.

“And how do you put value to that?”


 

@pointypeak701
liam.harrap@revelstokereview.com

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