Selling off Enmax best bet for Calgary

OPINION

Selling off Enmax best bet for Calgary

The week after its CEO was ridiculed by Forbes magazine, alongside book cookers, insider traders and the oil-spilling schlemiel who headed BP as one of the "biggest CEO screw-ups of 2010," energy producer Enmax Corp. is opening itself up to finally give Calgarians a look inside the company they own.

The utility delivered to its only stockholder, city council, Thursday a corporate report adhering, for the first time, to national standards. In the document, a copy of which was obtained by the National Post, the company details its blue-chip governance practices. But Calgarians will likely be interested only in the long-awaited revelation of what kind of paycheques Enmax officials bring home.

If taxpayers can live with what they see, this may start repairing the once wholesome image of an institution devastated by reports of lavish spending on compensation and perks. That would include the sneer from Forbes over CEO Gary Holden's "paranoid" companywide five-page email sternly warning staff to keep quiet about company business, alluding to legal repercussions, after reporters caught wind of his $2.7-million salary, executive chauffeur, and company-sponsored house parties featuring rockers Tom Cochrane and Gord Downie (this year's Christmas party would have featured a $70,000 Blue Rodeo set, till public outcry prompted a cancellation).

If not, the fun that municipally owned Enmax has suffered in recent weeks being a political football will likely only get worse.

To Enmax's credit, the report shows a skilled, diversified and engaged board, averaging 90% meeting attendance; strict monitoring of, and first-rate compliance with safety, pension governance, and enterprise risk-management policies; and realistic benchmarking to ensure conformity with peer groups on compensation.

None of it, though, will get the attention that the $850,000 average 2009 sa lary paid to seven executives, their substantial defined benefit pensions, or the average $130,000 paid to directors (including former Ontario premier Mike Harris) will receive. Not now that recent leaks have turned Enmax into a target for both taxpayer advocates and class warriors alike.

Exactly how much of that is Enmax or Mr. Holden's doing is debatable. Executives insist these disclosures were en route, even before its rivals in Calgary's competitive power market allegedly began leaking gossip about Enmax's swanky culture. Directors' pay, and their 60% raise last year, was approved by city council, and Enmax insists that the board, including two aldermen, knew all about Mr. Holden's hefty paycheque -- even if other aldermen didn't. And when reporters in September called for salary details, Enmax willingly volunteered them, sources say.

Plus, it was council's own decision years ago to consolidate its shares that exempted Enmax from the reporting requirements demanded of publicly traded companies, notes Ric McIver, a former city councillor and recent mayoral candidate.

"It was right in public that city council said we want [Enmax] to be less accountable ... and pretty much the entire city council got away with it, and they shouldn't have," says Mr. McIver, adding that he was one of a minority opposed.

But the optics have been lousy for everyone.

Calgarians saw Mr. Holden's nearly $3-million paycheque as preposterous compared with the $600,000 paid to the CEO of Hydro-Quebec, a company 10 times Enmax's size. Mr. Holden's predecessor made roughly $500,000. But the company has been well made over since then, with returns nearly twice those of Edmonton's Epcor utility, whose CEO rakes in not much less than Mr. Holden.

Still, publicly owned Enmax's debt has ballooned from $50-million in 1999 to $1-billion, and the company engages not just in the more competitive retail market (Epcor doesn't) but in riskier energy trading. And yet, dividends to the city have climbed, too, at $62-million this year -- helping to keep Calgary's property taxes among the lowest for any major Canadian city.

And this is where the conflicted nature of Calgary's fiscal concerns, and Enmax's ownership status, guarantees complicated futures for both. Aldermen are loath to lose a utility that lets them spend richly without the political cost of higher taxes -- a "little gold mine" as one once put it -- even as they scowl at the rewards going to those making it possible.

Mayor Naheed Nenshi insists that Enmax is "not a gigantically big company" and with just 1,500 employees, "needs to be run that way." He's also argued that Enmax "can't live in both worlds," partying it up like a Wall Street darling, while failing to report to its shareholder with less rigour.

"There is a lot more data with a publicly traded corporation than there is with a publicly owned corporation," says Scott Hennig, Alberta director of the Canadian Taxpayers Federation. "They [the executives] want to operate like they own the company."

But accusations of Enmax's extravagance may have been what council wanted to avoid having to face, and answer to the voting, power bill-paying public, all along.

Owning a power company comes with a mess of irresolvable and uncomfortable conflicts: The more Enmax charges Calgarians, the bigger its dividends to Calgary's treasury; the more Enmax spends on talent, the more customers feel ripped off; and if the history of Crown corporations is any guide, the more the city interferes with running Enmax, the more likely the experiment will end up a mess of costly red ink.

Nine years ago, the last mayor, Dave Bronconnier, won a fear-based campaign against selling off Calgary's energy security against his pro-privatization mayoralty rivals. Since then, its value has reportedly grown from $1-billion to $6-billion.

Today, Enmax's executives are, privately, agnostic about who owns the firm, yet find themselves resented by private rivals and provincial legislators irked over Mr. Holden's activism on Alberta power policies. Calgary's council, meantime, finds itself in the awkward position of apologizing for its asset's success.

More open disclosure won't make their political lives any easier, or the independence Enmax needs to succeed any more certain. Selling the company off, and investing the cash elsewhere, may be the only way to make everyone happier.