Striking the right balance

EPCOR must meet the needs of many: customers, its shareholder and regulators, along with the environment and communities it serves. Long-term planning and performance targets are two key ways the company stays transparent and accountable to all.

The concepts of balance and accountability are universal yet simple. Young or old, dentist or diplomat, grad student or student on the playground — most of us can strip away the complexities of a situation and tell if something is, on balance, working or not and why. This simple idea — that balanced and transparent goals can benefit all parties — is the driving force behind EPCOR’s commitment to providing value and integrity in service delivery. But how do you go about achieving the right balance in a business as complicated as EPCOR’s, across a set of services on which millions rely? How exactly does that get defined and refined? And by who?

Martin Kennedy is the Director of Sustainability and External Relations with EPCOR. As he describes it, it’s about how EPCOR weaves together layers of systems and processes in its governance model, all of which are designed to both generate and uphold value and equity for everyone involved — the company, the customer, the shareholder and the regulator. “It’s all connected,” he says. “The long-term planning process, Performance Based Regulation, our Environment, Social and Governance work. They are all linked.”

Underpinning everything is EPCOR’s long-term planning process (LTP), which is built according to five and ten year outlooks. The LTP assesses opportunities and risks. It creates strategies for growth, such as specific projects or expansion opportunities. It considers new markets and regions. And it’s iterative, meaning it is under constant revision and reassessment by both management and the board.

“Management is the creator and owner of the LTP,” Kennedy notes, “but the board leads its oversight and provides feedback. It’s a dialogue, a stress test. Management does the heavy lifting to build it, but the board does the heavy pushing by challenging management to make it as bulletproof as possible."

Everything is connected. The PBR is a complex question asking for a simple answer: does EPCOR do what they say they are going to do, do they do it efficiently, and do they do it with integrity?

It is obviously a massive undertaking to supply water, power and drainage to millions of people across North America while accounting for financial and human decisions in transparent and verifiable ways. It’s not easy and nor should it be. It’s the right thing to do because it makes for a better company, a better community, and a better planet. One of the key tools EPCOR uses in this undertaking is what’s known as Performance Based Regulation (PBR), a regulatory structure used to establish the rates EPCOR can charge water, wastewater and drainage customers in Edmonton. Water Services has been under PBR since 2002. The Gold Bar Wastewater Treatment Plant was transferred to EPCOR in 2009 and also operates under PBR. And when Drainage Services was transferred to EPCOR in 2017, the company made the commitment to utilize a PBR process similar to that of Water Services.

So just how does the PBR get set? “The PBR system,” says Darrell Manning, EPCOR’s Director of Regulatory and Operational Excellence, “is based on determining how much revenue will be needed to pay for the cost of building, maintaining, operating, and financing the utility system over the next several years. The utility is required to make prudent decisions that are in the public interest. The regulator reviews these plans, and approves the utility’s rates, fees and charges.”

The PBR process is a way for every stakeholder to contribute toward creating a clean, livable and healthy community.

It takes years to bring a PBR cycle to a successful conclusion. The rates EPCOR can charge are set by the City as regulator, with additional input coming from City Council, the utility and customer feedback.

Capital spending, community growth and the operating programs are considered over multi-year periods. To give a sense of the complexity of this process, the filing for the most recent PBR was 3,000 pages long and the capital program was $1.3 billion. Every dollar EPCOR wants to spend is in the PBR. “And it’s only by approving the collection of revenue from customers through rates that EPCOR gets permission to do those things,” notes Manning.

It’s also important to clarify the incentives at play. EPCOR is penalized if it fails to hit its targets but hitting the targets doesn’t guarantee extra profit. It only means EPCOR gets to keep doing its job. The transparency of the system guarantees that the holistic nature of the process is respected and nurtured. This matters because — balance, remember — EPCOR’s definition of doing a good job is not based solely on profit, but also by serving customers well, while doing its part to look after the planet, and while empowering customers to do their part, too. It’s about making sure the weight of each component helps maintain the balance of the whole.

The PBR process, in other words, is a way for every stakeholder to contribute toward creating a clean, livable and healthy community. The environmental aspect of the PBR process is indicative of this focus, especially as it so perfectly aligns with EPCOR’s broader ESG approach. A good example is the Stormwater Integrated Resource Plan (SIRP). This 20-year $1.6 billion plan approved in the latest PBR, the long-term goal being to protect communities from the risk of flooding. There were also dollars included to use green electricity for the water utility in Edmonton as part of an overall plan to ultimately reduce the electricity carbon footprint of those utilities to zero. The PBR process, therefore, is a direct contributor to and driver of EPCOR’s ESG goals.

Everything is connected. The PBR is a complex question asking for a simple answer: does EPCOR do what they say they are going to do, do they do it efficiently, and do they do it with integrity? EPCOR works hard to ensure the answers to those questions are always “yes,” so that future rates will encourage growth and continued success.

It takes people to make all this happen. Public engagement is important to both the LTP and PBR and involves meaningful and regular consultation to make sure EPCOR is delivering value for money and listening to what the community says it needs. As for the employees, the company can have a long-term plan, but without a talented and dedicated workforce, the plan is not worth the paper it’s written on.

“Our vision and mission revolves around four focus areas,” says Kennedy. “At the top of the list is people. We want to find good people and focus on learning and development, professional growth, career development initiatives, the diversity of employee populations, offering strong retirement and succession planning. The second of those four things is growth. The third is operational excellence. And the fourth is community, meaning the customer and the value EPCOR creates for the communities we serve.”

The transparency of the system guarantees that the holistic nature of the process is respected and nurtured.

It all circles back to EPCOR’s fundamental governance principles as expressed through its long-term plan and ESG philosophies. These concepts are turned into action and measured through the PBR and its targets for outcomes such as environmental performance, customer service, reliability and drinking water quality. And EPCOR has to report back to the regulator on all of them, in public, which allows the public to keep tabs on how they are doing. Striking the right balance between profit, accountability and stewardship is important because EPCOR knows that the continuous effort required to achieve this balance is not an obstacle to overcome. It’s the reason it works.

Investing in our people is one way we're building stronger communities

We're committed to helping our communities by protecting the environment and promoting social responsibility. We do that by conducting our business responsibly, with openness and transparency. We're pleased to share our ESG report to showcase our performance in areas that are important to us—our customers, our partners, and the communities we serve.

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Striking the right balance

​EPCOR must meet the needs of many: customers, its shareholder and regulators, along with the environment and communities it serves. Long-term planning and performance targets are two key ways the company stays transparent and accountable to all.

Everything is connected. The PBR is a complex question asking for a simple answer: does EPCOR do what they say they are going to do, do they do it efficiently, and do they do it with integrity?

Inv​​​esting in our people is one way we're building stronger communities

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EPCOR must meet the needs of many: customers, its shareholder and regulators, along with the environment and communities it serves. Long-term planning and performance targets are two key ways the company stays transparent and accountable to all.

Investing in our people is one way we're building stronger communities