Direct Energy gets approval for Alberta gas and electricity retail business

CALGARY - - The $128-million sale of Atco Group's natural gas and electricity retailing businesses received approved Friday, nearly a full year after the deal with Direct Energy was first announced.

The deal will see Direct Energy, an arm of British energy retailing giant Centrica PLC, pick up about one million customers in Alberta to become Canada's largest provider of retail energy services.

Centrica, which acquired Direct Energy in 2002, has been actively growing its Canadian operations, and already supplies natural gas and electricity to more than 1.3 million households in Ontario and Manitoba.

Several more decisions by Alberta's Energy and Utilities Board remain before the deal is completely finished, including approval of new regulated rates that Direct Energy can charge customers.

"This decision is very fundamental," said Lori Topp, Direct Energy's senior vice president, western region.

"It has endorsed Direct Energy to be the provider of regulated services on the gas and electric side within Atco's current franchise territory."

The regulator's approval of the transfer of assets to Direct Energy is a step closer to the end of a long chapter for Calgary-based energy conglomerate Atco.

Although the sale was announced last December, Atco actually put its retail businesses on the block back in the spring of 2001.

"We announced this transaction about a year ago now," said Siegfried Kiefer, managing director of technology for Calgary-based Atco Group. "And I don't think at that time we expected anywhere near this length of time to conclude the deal."

But buyers were hard to find, as companies such as Atco and others complained that the playing field was not level with powerful, municipally owned utilities such as Edmonton-based Epcor and Calgary-based Enmax.

Still, critics of the Alberta government's electricity deregulation plans decried the regulatory approval of Direct Energy's acquisition.

"Unfortunately, there will be millions of dollars in extra costs to individual bills for both electricity and natural gas in this province as the result of the transfer of assets from Atco to Direct Energy," said Liberal energy critic Hugh MacDonald.

"The City of Calgary has indicated there will be an additional $47-million cost to consumers," MacDonald told a news conference. "According to the consumers group, there will be increases in the administrative costs in regards to billing."

Direct Energy said it would seek only "fair" costs associated with unbundling the distribution and retail business associated with gas and electricity.

"We are not seeking to make money on the retail customers, we are simply seeking to recover reasonable and prudent costs associated with delivering the retail function," said Topp.

The deal with Direct Energy was subject to legislative amendments from the Alberta government as well as approval by Alberta's Energy and Utilities Board.

Direct Energy also said Friday that it remained interested in growing its business further in Ontario, where the newly elected Liberal government last month introduced legislation to lift a rate freeze imposed by its Conservative predecessors.

"The landscape is shifting again with the structure of the rate caps changing again," said Topp. "And we are positioning our organization to deliver innovative energy solutions to Ontarians within the structure that's allowable there."