Evidence of meeting #7 for Special Committee on Cooperatives in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was credit.
A video is available from Parliament.
2:25 p.m.
Conservative
2:25 p.m.
NDP
Lysane Blanchette-Lamothe NDP Pierrefonds—Dollard, QC
Thank you.
Mr. Marshall, you spoke about your role in supporting the start-up of cooperatives in Alberta.
In your opinion, does the federal government still have a role to play in the start-up of cooperatives?
2:30 p.m.
President and Chief Executive Officer, Mountain View Credit Union Limited
Very much so. From the perspective of education, and then if there are grant programs available to assist some start-up co-ops, I think those are really two fundamental purposes that the federal government could review or look at.
2:30 p.m.
NDP
Lysane Blanchette-Lamothe NDP Pierrefonds—Dollard, QC
Thank you.
What do you think of the fact that the cooperative development initiative is being done away with? Do you think that this will have an effect on the cooperatives you deal with?
2:30 p.m.
President and Chief Executive Officer, Mountain View Credit Union Limited
I do, and to the degree, I'm not quite sure. I'm probably not the right person to ask that question of, but I could certainly table that and bring back a better response for you.
2:30 p.m.
NDP
Lysane Blanchette-Lamothe NDP Pierrefonds—Dollard, QC
Thank you. That would be greatly appreciated.
You briefly mentioned grants that could make it easier to start cooperatives. Could you elaborate on that by telling us what type of grants would be effective and what impact they would have on the start-up of cooperatives?
2:30 p.m.
President and Chief Executive Officer, Mountain View Credit Union Limited
Initially, start-up co-ops' understanding of proper governance would be the first place they could certainly improve and benefit from in that regard. Then, just as a case, by way an example, if you look at a housing co-op, they're typically looking for some type of funding to assist them, even if it's over the course of the construction of the housing units. So it may be a repayable grant, for that matter, or a repayable loan. That's where the risk is upfront, until they sell all the units and have the people with their equity in place. So perhaps there are some opportunities to assist the projects in getting off the ground, especially on a start-up co-op. If it's a co-op that has been in existence for a time, they typically have that type of capital.
2:30 p.m.
NDP
Lysane Blanchette-Lamothe NDP Pierrefonds—Dollard, QC
Thank you.
Mr. Rockel, you praised the creation of this committee because you believe that it is important to take an interest in the sustainability and funding of cooperatives, as well as in the regulations associated with them.
I was wondering whether you had any suggestions to make to this committee regarding the government's policies to protect cooperatives and to promote their start-up.
2:30 p.m.
President, Alberta Federation of Rural Electrification Associations (AFREA)
If you look at some of the five factors of success for co-ops, you have leadership—and I guess we have to make sure that we have the right leaders in the community. One of the ways of doing that is by running board governance workshops for people who want to learn more about how to operate a meeting and how to operate a co-op. You have to help with clarifying the goals of people. What are you really doing with your co-op?
I also encourage business cases. If you want to borrow a whole bunch of money, you make sure you have a business case to do that, especially if you have to go to a credit union. They're very good at lending money.
2:30 p.m.
Voices
Oh, oh!
2:30 p.m.
President, Alberta Federation of Rural Electrification Associations (AFREA)
Okay.
We had a real problem with borrowing money, because when any financial institution would look at an REA, they see a pole and a line but really didn't classify those as assets. But because an REA can determine its own rates—you can charge $20 a month today, but tomorrow you can up it to $40—there is a way of doing that. But when the government comes, I think we have to make sure that the legislation does not change to the worse, making it a little harder to get started. Whether it's loans or grants, most people can try to get their own money to do something.
On their tax status, too, if they are not-for-profit, hopefully that won't change. We hear funny rumours about that. We don't want that to happen.
We want protection so we can grow and exist. Sometimes the hardest person to deal with is the government and sometimes they're the easiest. It's dependent on what they believe.
2:30 p.m.
Vice-President, Alberta Federation of Rural Electrification Associations (AFREA)
If I can just add to that, the government's role is not to do the work but to create an atmosphere and a social environment that would stimulate consumers to work together for their own betterment, to help themselves and virtually create a better country and world that we all live in.
2:30 p.m.
Conservative
The Chair Conservative Blake Richards
Okay, thank you very much.
We'll move now to Mr. Butt for the next five minutes.
2:35 p.m.
Conservative
Brad Butt Conservative Mississauga—Streetsville, ON
Thank you very much, Mr. Chair.
Gentlemen, thank you for being with us this afternoon.
I've quite enjoyed the week. I have learned a lot about cooperatives that I certainly didn't know before. I certainly knew about housing cooperatives, and credit unions a little bit, but I didn't know about.... I'm learning a lot and I'm really appreciating it.
There's one thing I am finding difficult to understand, and maybe from each of your perspectives you can explain it. We certainly have had some cooperatives making deputations today that they certainly don't view themselves as being traditional businesses. And we've heard from others, I would suggest to you, that are really no different from what I would consider to be a regular.... I was in the private sector for 20-plus years before I became a member of Parliament, in private-sector companies that were driven by lots of private-sector motives versus what the motives of cooperatives often are around social enterprise, and so on. But how do you identify yourself?
Certainly, Mr. Marshall, you talked about “competition”. To me, that's a private business. That's what we deal with. We compete, and if we're the best, we're going to get the customers. So how would you say your two organizations compare with traditional business versus how you are obviously uniquely different in what you are doing?
Did you want to start, Mr. Marshall? Then Mr. Rockel and Mr. Astner can answer.
2:35 p.m.
President and Chief Executive Officer, Mountain View Credit Union Limited
The one area that I'd suggest we're different from banks is that we are locally owned by members in our communities. We're locally governed by several of those members; in our case it's nine directors on our board. We turn around and invest every dollar that we make right back into our communities, whereas our counterparts, the chartered banks, don't have that same commitment.
Soon we'll be in five communities that have no institutions other than us. We've seen banks actually pull out of rural sectors throughout Canada just because, for them, it makes economic sense. So I guess at the end of the day, although profit is important to us, because of sustainability....
If you want to eliminate tax for credit unions, that would be wonderful. That would be one more step towards helping that. But we do pay income tax.
That being said, we're not driven by earnings per share. We're driven by what is right for our community, as long as it's a sustainable venture in that regard. That's a fundamental difference. I say this from experience. I've worked in a small chartered bank. Believe me, every quarter there was a lot of pressure on producing the appropriate EPS. In a credit union environment, you do what's right 5, 7, 8, 10 years out, whatever is right in that regard. That's the fundamental difference, if I may say, Brad.
2:35 p.m.
Vice-President, Alberta Federation of Rural Electrification Associations (AFREA)
The environment we operate in is a regulated world. Each individual rural electric co-op has its own board of directors. Under the legislature, we have our own control. We do our own regulation. That's only because we serve our own members. Our shareholders and our members are the same.
The other parties that are in the industry with us are large international corporations. They are guaranteed a 9.25% return on their investment through the [Inaudible--Editor]. Their incentive is to.... I guess they don't have the apprehension about making the investment. The more they invest, the greater their return.
We operate on the basis of trying to supply the service to our members, the owners of the co-op, at cost. So we're seeing quite a spread in the rates for our members and the utilities. Then of course, justifiably so, that gives them a little more incentive to eliminate the local co-ops as well.
2:35 p.m.
Conservative
Brad Butt Conservative Mississauga—Streetsville, ON
Is the electricity system in the province of Alberta deregulated? Or is it regulated by the province, as it is in Ontario where I'm from?
The Ontario Energy Board, in the case of Ontario, sets those rates that I as a consumer pay, even though I can choose to have Direct Energy sell it to me or my local distribution company, Mississauga hydro in my case.
Is it deregulated? Do you have to compete with that, or do you have to work within that regulated electricity environment?
2:35 p.m.
Vice-President, Alberta Federation of Rural Electrification Associations (AFREA)
Alberta is quite different from Ontario. Only the wires are regulated in Alberta, and that's to prevent duplication, so that you don't get a wire running down each side of the road. So that remains regulated.
The generation portion is deregulated. The actual retailing of the energy is deregulated. So that's open.
Our co-ops have the ability to set up an arm's-length entity of an affiliated retailer and retail to their own members only or to other REAs. But that's the only part that is not regulated there.
2:40 p.m.
Conservative
July 27th, 2012 / 2:40 p.m.
NDP
Mathieu Ravignat NDP Pontiac, QC
Thank you, Mr. Chair.
I have a number of co-ops in my riding, and what has always impressed me is their resilience. It seems that the way co-ops work basically allows them to weather storms that perhaps private businesses don't.
What I want to ask you about—and, of course, I thank you for your presence—is why you think your particular institutions have been so resilient. We're talking about quite a long time.
2:40 p.m.
President, Alberta Federation of Rural Electrification Associations (AFREA)
The main reason is that they are member owners of the system. When they drive down the road, they can say, “I own that power pole.” Also, the rates, in most cases, are less than what the utility company is paying. It's an investment in the future. They look back, and some of their grandfathers or fathers or uncles helped to physically build the system.
It's also self-financed. A lot of people, including, put up their own money. They lent money to their neighbours in order to start it. There's a lot of pride in it.
The only thing now, as I said before, is that they're a plum; somebody wants to buy them.
2:40 p.m.
Vice-President, Alberta Federation of Rural Electrification Associations (AFREA)
The original generation not only spent the dollars in building the system, but they also built a reserve to operate the system. If there were a severe storm that came through or something that required a significant investment, the dollars were already in place for them to spend; they didn't have to get financing.
