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 recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Dale Ward  Corporate Secretary, Manitoba Central, Assiniboine Credit Union
  • Nigel Mohammed  Director, Business and Community Financial Centre, Assiniboine Credit Union
  • Albert Cramer  Chairman, Red Hat Co-operative Ltd.
  • Doyle Brandt  Red Hat Co-operative Ltd.
  • Peter Harty  Director, Federation of Alberta Gas Co-ops Ltd.
  • Kevin Crush  Manager, Communications, Federation of Alberta Gas Co-ops Ltd.
  • Jodie Stark  Vice-President, Legal and Corporate Affairs, Concentra Financial Services Association
  • Tim Archer  Executive Director, Community Health Co-operative Federation Ltd.
  • Patrick Lapointe  Member, Community Health Co-operative Federation Ltd.
  • Merv Rockel  President, Alberta Federation of Rural Electrification Associations (AFREA)
  • Robert Marshall  President and Chief Executive Officer, Mountain View Credit Union Limited
  • Dan Astner  Vice-President, Alberta Federation of Rural Electrification Associations (AFREA)
  • Vera Goussaert  Executive Director, Manitoba Cooperative Association
  • Bill Dobson  Director, United Farmers of Alberta
  • Hazel Corcoran  Executive Director, Canadian Worker Co-operative Federation
  • Peter Hough  Financial Officer, Canadian Worker Co-operative Federation
  • Bob Nelson  President and Chief Executive Officer, United Farmers of Alberta

12:15 p.m.

Conservative

The Chair Blake Richards

The time has expired, but I'll allow it.

12:15 p.m.

Member, Community Health Co-operative Federation Ltd.

Patrick Lapointe

Aboriginal people, for instance, have difficulty getting access to the services they need. So particularly at our organization, we're expanding in that area. There are disease groups such as those with HIV. We have the potential to expand in that area to help prevent and manage HIV in that community.

12:15 p.m.

Conservative

The Chair Blake Richards

Thank you very much.

That concludes the time we have for this panel. I thank the three individuals we have had, the two groups. It's much appreciated.

We'll now suspend the meeting.

1:50 p.m.

Conservative

The Chair Blake Richards

I'll call the meeting back to order.

In our first panel this afternoon we have two organizations with us. From the Alberta Federation of Rural Electrification Associations, we have with us Mr. Merv Rockel, the president, and Mr. Dan Astner, the vice-president. We also have with us the Mountain View Credit Union Limited and Mr. Robert Marshall, president and CEO.

Welcome to all three of you.

We will now have opening remarks from each organization. I will first start with the Alberta Federation of Rural Electrification Associations. You have the floor for 10 minutes to make opening remarks. When each of you has about one minute remaining in your time, I'll signal to you as such. If you reach the full 10 minutes, I'll give you a signal to wrap up as well. I will give you just a little bit of leeway but not much.

Mr. Rockel, are you the one giving the remarks? Okay.

I will turn it over to you, then. You have 10 minutes to make your opening remarks.

1:50 p.m.

Merv Rockel President, Alberta Federation of Rural Electrification Associations (AFREA)

Thank you.

I'd like to thank the chair and the vice-chairs and the rest of the committee for this invitation. We really appreciate it.

Rural electrification associations, known as REAs, are unique to Alberta. The Alberta Federation of REAs represents an entity that exists nowhere else in Canada. It is one of pride, but can also be one of specialization and sometimes uncertainty.

The story of rural electrification was slow to develop in Alberta compared to other provinces in Canada. Our story begins in the mid-1940s, when 90% of the farmers interviewed were still waiting for power. Grassroots spirit and passion for a cause ignited an electrification movement. Public power was the force behind rural electrification in other provinces, but Alberta farmers had to find a way to work with the government and the utility companies. The government did not want to be labelled as a socialist government by providing public power, and the utility companies didn't see it as a way of making any money. Farmers just wanted what was an expected service by rural consumers. Electrification changed rural life.

Leaders in electrification formed a cooperative to satisfy requirements. They pooled not only their financial resources but also their human resources, working side by side in cooperative fashion to build the lines needed to bring power to the remote farms.

Many things have changed over the years, but it remains the case that a farm still requires the necessary power to operate and sustain its livelihood. In fact, in order to keep up with the growing market trends, power is even more crucial to the agricultural operation that exists today.

Cooperatives have a long-running history in Canada, building our nation and building our provinces. They were formed because there was a need, and nobody else came forward. There is a wide diversity in cooperative awareness, from those who have patronized several co-op businesses over the course of many years to those who have never heard of co-ops.

As we look ahead, as not only rural electrification associations but as every cooperative business will do, our concerns involve sustainability. We realize that our decisions of today will impact generations of consumers tomorrow. When the REAs consider our sustainability plans, it's necessary to build our future directions on the foundational pillars of society, the social, economic, and environmental aspects that create a solid base on which to build not only a business but also a better community and world.

The AFREA is proud to represent our member rural electrification associations across the province of Alberta. In 2011 we completed our own sustainability strategy document that encourages our member associations to get out into their communities and create awareness. If you combine our promotional efforts to increase our community presence alongside the historic United Nations declaration of 2012 as the International Year of Cooperatives, you have a formidable match. Replace any of the references to the rural electrification and the REA advantage sustainability document with any cooperative and you have a general plan that encompasses a business willing to incorporate community-building values.

Sustainability is cooperatives getting back to their roots. It's also creating awareness that involves education, inclusion, and encouragement. It's also about offering services above and beyond, without worry of profit. Sustainability is an acceptance that might involve redefining a purpose to ignite the passion that brought the organization to the forefront when the need arose. Rediscover that passion, and cooperatives will continue to prosper.

This International Year of Cooperatives provides opportunities for cooperative businesses to shine while in the global limelight. It brings cooperatives together, with a chance to create a common bond with themselves. It truly promotes cooperatives working together as defined in the seven cooperative principles. The year provides a means to showcase a co-op business, a product and/or service, while exemplifying the cooperative business model. The celebration encourages communities to come together as one, remembering those who led the way, but also celebrating those people who continue to make a difference in the cooperative world. The year is not a means to an end; it must be a renewed beginning.

As the provincial federation representing member REAs, the AFREA has a duty to explore and discover new ways to continue our own existence through the prosperity of our membership.

The demographics of rural Alberta are constantly changing. The power industry is a dynamic one. However, we do not operate in isolation. It is imperative that we work in unison with those around us. We must not only provide for today’s consumers but also look ahead to the consumers of the future.

It is our belief that the International Year of Cooperatives 2012 should be just the beginning of what needs to be a renewed campaign of cooperative support. A constant program, with financial outlets, public awareness, and government support, will go a long way toward maintaining a strong cooperative movement.

Cooperatives give back to the communities where they exist, and their contribution to local economics, through job creation and community investment, sums up their value.

We applaud the federal government for the committee's mandate and the directives identified in the recent House of Commons motion. We are honoured to contribute our input to this committee through this presentation, which shares with you the story behind the REA cooperative business.

We also represent the future of all co-ops by confirming that sustainability issues, funding issues, and renewed regulatory considerations are required so that cooperative businesses continue to build a better community and a better world.

On behalf of the Alberta Federation of REAs and our member REAs, thank you.

Now, Dan is more than willing to answer any questions.

1:55 p.m.

Some hon. members

Oh, oh!

1:55 p.m.

President, Alberta Federation of Rural Electrification Associations (AFREA)

Merv Rockel

I will too.

1:55 p.m.

Conservative

The Chair Blake Richards

I'm pretty sure that many members of this committee listening wish they could give a presentation and then let somebody else take all the questions for them. So lucky you, I guess.

Thank you.

We'll move now to Mr. Marshall. You have 10 minutes to make your opening remarks as well.

July 27th, 2012 / 1:55 p.m.

Robert Marshall President and Chief Executive Officer, Mountain View Credit Union Limited

Thank you, Mr. Chair, and members, for inviting me to be part of this important study of the opportunities and challenges facing the cooperative sector in Canada.

My name is Robert Marshall, and I am the president and chief executive officer of Mountain View Credit Union. As such, I will be speaking from the perspective of our credit union and, more generally, credit unions in Alberta. Please allow me to begin by spending a few moments talking about Mountain View Credit Union.

Headquartered in Olds, Alberta, Mountain View Credit Union has assets exceeding $550 million. Our 11 rural branches, soon to be 12, provide service to over 15,000 members. Mountain View takes great pride in giving back to the communities in which it operates. For the past five years, Mountain View has consistently contributed approximately 3.5% of its pre-tax income in scholarships, donations, and sponsorships. Our employees also show their commitment to their communities by volunteering a significant amount of their time to various local events and organizations. In 2011, Mountain View Credit Union staff contributed over 4,500 hours in volunteer time to everything from 4-H to minor hockey. We also very pleased to have paid our members over $15 million in profit sharing since 1988.

I would now like to take this opportunity to provide the committee with further context on the credit union system in Alberta. The Alberta credit union system is an important provider of financial services to Albertans and a key contributor to the provincial economy. Today, 34 independent credit unions operate in Alberta, with over 650,000 Albertans as members. Province-wide, credit unions have over 200 branches and employ nearly 3,500 Albertans.

During the first quarter of 2012, the Alberta credit union system’s total assets surpassed the $19-billion mark, growing by $740 million over the past year. The profitability of the Alberta credit union system remains strong, with net income of $33 million for the first quarter of 2012.

Consistent with the national trend taking place within the Canadian credit union system, several credit unions in Alberta have chosen to consolidate in order to remain competitive. This consolidation is in response to several factors, such as: changing regulatory standards; increased competition from banks, insurers, and non-conventional financial service intermediaries; and significant technological advancements in the financial services sector.

One notable example was in 2008, when three Alberta credit unions consolidated to form Servus Credit Union, one of the largest credit unions in Canada. We expect the consolidation trend to continue in Alberta as credit unions strive to remain competitive in the rapidly changing financial services marketplace.

As mentioned by the Credit Union Central of Canada when they appeared before you on July 10, the consolidation and growth of our system has implications for the traditional scope of credit unions, which has always been provincial. For instance, Servus Credit Union, which I mentioned earlier, holds almost 60% of the provincial system’s assets. Similar situations exist in other provinces. For these credit unions the greatest opportunity for growth exists outside their provincial boundaries.

On behalf of the Alberta credit union system, I would like to thank the Government of Canada for introducing, as part of the budget in 2010, a federal credit union option. While Alberta credit unions are successful financial institutions under provincial jurisdiction, we view the option of a federal charter as another means for interested credit unions to achieve further growth opportunities and enhance services to their members.

We were pleased to see that the complementary regulations required to bring the federal credit union framework into effect were recently published in the Canada Gazette.

As you heard earlier from Canadian Central, credit unions are very concerned about the extensive and unbalanced competition we experience from crown financial institutions. In Alberta, we are subject to this unbalanced competition from both federal and provincial crown institutions. This is particularity evident in the agricultural lending market in Alberta. Despite the fact that Alberta credit unions have thousands of rural members and play an integral role in many rural communities throughout the province, our market share of Alberta’s approximately $15 billion in outstanding agricultural debt is only around 5%. Meanwhile, Farm Credit Canada holds approximately 25%, and two provincial crown institutions, ATB Financial and the Agriculture Financial Services Corporation, combined hold close to 20%.

The primary cause for low credit union market share in Alberta’s agricultural lending market is the fact that crown financial institutions, such as FCC, are not subject to the same regulatory and legislative requirements as credit unions and banks. This translates into market advantages for crown financial institutions.

For example, FCC completes their own in-house appraisals and then lends up to 100% of the value of the security, which no private sector financial institutions are permitted to do. Given FCC's ability to access funds using the federal government's AAA credit rating, they are able to offer lending interest rates below what credit unions and banks can offer. In Alberta, we have heard of instances where FCC has competed with credit unions beyond the agricultural marketplace by extending favourable financing to commercial ventures that have very little involvement in agriculture.

Unbalanced competition from crown financial institutions is such a significant issue in Alberta that many credit unions are questioning whether they will play a role in the future in providing agricultural financing or services to rural communities. Accordingly, we fully support Canadian Central’s position that the government amend FCC's legislation and operating principles to bring them into closer alignment with those of the Business Development Bank of Canada and Export Development Canada. Specifically, this would mean that the legislation governing FCC would be subject to a regular parliamentary review and, second, be amended to require FCC to operate in a manner that complements rather than competes with the activities of private sector lenders.

One last point I wish to raise is with respect to the ever-growing regulatory burden on financial institutions. As noted by Canadian Central, credit unions agree that a strong regulatory framework is important in protecting the savings and security of Canadians. However, we are concerned that the regulations are being applied in the same manner to all financial institutions, whether they have 2,000 employees or only 110 employees, as is the case with Mountain View Credit Union. The result is much higher relative compliance costs for credit unions.

The government’s Red Tape Reduction Commission emphasized in its final report that a one-size-fits-all approach to regulation tends to disproportionately burden smaller businesses, such as credit unions. We agree with that conclusion and urge the government to follow through on its commitment in Budget 2011 to require regulators to examine current and future regulation through a small business lens, to ensure that new and existing rules do not adversely affect credit unions while creating unintended advantages for larger financial institutions.

Mr. Chair, on behalf of Mountain View Credit Union, I wish to thank this committee and your colleagues for undertaking this important study.

Across Canada this year, cooperatives, including credit unions, are celebrating the 2012 International Year of Cooperatives. Cooperatives have played a vital role in building our country, and we hope the insight provided in your final report will continue to promote and support cooperatives' contributions to our communities.

I thank you very much for the opportunity to present to you today, and I would be pleased to respond to any questions you may have.

2:05 p.m.

Conservative

The Chair Blake Richards

Thank you very much.

I appreciate both of your opening remarks.

We'll move now directly to questioning by the members.

In our first found we have Madame Brosseau up first, for five minutes.

2:05 p.m.

NDP

Ruth Ellen Brosseau Berthier—Maskinongé, QC

Thank you, Chair.

I'd like to thank the witnesses for being with us today. It's always a pleasure to hear the testimony. After hearing the 10-minute presentations, I find that five minutes, by contrast, is so, so short.

I'll get right to it. To the Alberta Federation of Rural Electrification Associations, Alberta has energy needs, and they're increasing. If the provinces are importing more energy than they're exporting, I'm wondering how rural electrification associations address this issue.

2:05 p.m.

President, Alberta Federation of Rural Electrification Associations (AFREA)

Merv Rockel

We're not in the production of energy, other than microgeneration on farms and things like that. There are some farmers who have put solar panels up, and windmills or wind chargers, to produce and supplement their own energy.

2:05 p.m.

NDP

Ruth Ellen Brosseau Berthier—Maskinongé, QC

Do you serve just rural communities, or have you expanded?

How do you become a member? Are you a member because you use the energy?

2:05 p.m.

Dan Astner Vice-President, Alberta Federation of Rural Electrification Associations (AFREA)

Alberta is kind of different from most other provinces in that it went through the deregulation process, often referred to as re-regulation, which may be a truer picture. This is where they separated out the distribution wires of anything less than 25,000 kilovolts. Then it had the transmission wires, the high-voltage lines coming from the generators. Generators are separate entities. Then the energy portion is another competitive area where the actual kilowatts you consume are sold to you, and it is handled by a separate party. So Alberta really complicated the system.

The rural electrification associations only own the rural distribution sector of it, and really are not involved in.... Well, I guess companies prior to this re-regulation actually had to put up firewalls and totally separate all those segments if they wanted to maintain their assets. They were supposed to be separate entities and, in a lot of cases, they sold them.

As consumers, we originally developed our own distribution system and deal with that—although there is room for each individual consumer to put up his own solar power or microgeneration in those areas. Any time any individual consumer wants to get into small generation, we, as the wire owners, put in the bi-directional meters that measure how much energy is consumed as well as put back into the system. That's all balanced off on their month-end bill.

2:10 p.m.

NDP

Ruth Ellen Brosseau Berthier—Maskinongé, QC

So like most co-ops, there is obviously a need for energy in rural areas, and you guys banded together and formed this co-op. Is it expanding? How does it...? I don’t know how...because this is so new to me.