St. Albert residents should expect to see wastewater rate increases for the next decade, as ARROW Utilities faces a significant capital funding crunch.
The funding issue, which mainly stems from unexpected capital costs for a major sewage treatment plant expansion project planned for 2024, also means ARROW Utilities will need the provincial government to increase how much debt the corporation can take on, as projections show it will surpass its roughly $137 million debt limit as soon as next year.
From 2000 until earlier this year, ARROW Utilities was known as the Alberta Capital Region Wastewater Commission (ACRWC). The public corporation has managed the Edmonton area's sewage infrastructure since 1985, and it annually sets sewer transmission costs for every cubic metre of water provided to ratepayers.
St. Albertans will see the effect of the corporation's financial situation as soon as next month, as the 7.2 per cent increase to residents' monthly utility bills that was initially put forward in the city's draft 2024 budget in October was further increased to 8.5 per cent after ARROW finalized its rates for the year on Nov. 24.
ARROW's finalized 2024 rates include a $0.51 increase per cubic metre of water for residences ($3.14 per cubic metre total), and a $0.41 increase per cubic metre of water for non-residential ($2.51 per cubic metre total). For context, Alberta's Utilities Consumer Advocate says an average urban household uses about 15 cubic metres of water per month.
St. Albert city council approved the 2024 budget, and its corresponding 8.5 per cent utility fee increase, on Dec. 19.
According to a 2024 budget report posted to ARROW Utilities' website, the plant expansion project referred to above is estimated to cost $78.3 million, which is higher than what the board initially forecast.
The plant is located north east of Edmonton on Township Road 540, near Range Road 232.
The Gazette asked ARROW spokesperson Cindy de Bruijn what the plant expansion's initial cost was estimated to be. De Bruijn did not provide a number, but said the initial cost was “based on conceptual estimates.”
“As design progressed and contractors were brought on board, the estimates have evolved to accommodate requirements,” de Bruijn said. “Further, construction costs have been impacted by the significant inflationary pressures that all industries are facing.”
The expansion project, according to ARROW's 2024 budget report, is needed to meet expected demand until 2040.
“The plant expansion [is] required as the current treatment capabilities are being taxed and adding risk to the overall system,” de Bruijn said.
Coun. Ken MacKay, who serves as ARROW's board chair after being a board member since he was first elected in 2017, said the pending demand is largely related to industrial growth in the Industrial Heartland, which is a 582-square kilometre piece of land encompassing parts of five separate municipalities, including Strathcona, Sturgeon, and Lamont County, as well as the City of Fort Saskatchewan and the northeast corner of Edmonton.
“Our plant, even though it's the third-largest plant in Alberta, [is] rapidly losing capacity,” MacKay said, adding that when Dow Chemical completes its planned $8.8 billion upgrade and expansion of its plant in Fort Saskatchewan, ARROW's wastewater treatment plant will be inundated with an estimated 10 mega litres of industrial wastewater.
“The wastewater treatment plant that we use takes quite a bit of industrial waste that is 100 times more dirty, for lack of a better word, than what you would get from residential wastewater.”
MacKay said many of the industrial facilities in the Heartland have their own contracts with ARROW and are charged accordingly, but “it's never enough for the actual capital costs.”
“It's going to be a little rocky for two years, I can tell you that right now.”
MacKay also said ARROW has been advocating to the provincial and federal government for funding assistance.
“[Governments] can't be out there making all these big announcements and not start thinking about what's underground,” he said. “If we would have told Dow, 'we can't take your wastewater,' what would have happened?”
Scott Johnston, the press secretary for Municipal Affairs Minister Ric McIver, said in an email that when it comes to ARROW's debt limit, the ministry “would consider the amount of the increase being sought and would assess and provide advice for the minister’s consideration at that time.”
Besides making sure the region's wastewater treatment needs are met, MacKay said another benefit of the plant expansion project is that it will allow ARROW to sell reuse water to industrial clients.
“It's a good news story,” he said. “We don't know what, potentially, the revenue will be yet — that's yet to be negotiated — but we can't provide a dividend [and] we won't be able to potentially lower our rates, but we will be able to stabilize our rates.”
“I know that municipalities are frustrated because obviously they feel that this kind of caught them by surprise, and some of it caught [ARROW] by surprise as well.”
MacKay said moving forward, ARROW plans to be “more transparent” and “more community involved” when it comes to how and when the corporation communicates its rate changes.
“By September [of each year] we should have rates pretty much finalized for the municipalities so they're not caught off guard in their budget documents.”
