updated October 3, 2023
What specific requirements in the Municipal Government Act (MGA) apply to franchise agreements?
Under section 360 & 45 of the Municipal Government Act, municipalities are permitted to charge franchise fees. The Alberta Utility Commission (AUC) regulates the franchise fee rates in the province.
How are franchise fees calculated, charged and remitted?
For electrical and natural gas distribution companies, franchise fees are typically calculated as a percentage of the total distribution charges on a customer’s bill. They are currently capped at 20% for electricity, and 35% for natural gas. For stability, franchise fees are typically not tied to the price of the commodity (electricity or natural gas). The distribution company collects the franchise fee from its customers, through a line item on the customer’s bill typically labelled the “Municipal Franchise Fee” or “Local Access Fee”. The distribution company then remits the franchise fee to the municipality in accordance with the terms of the franchise agreement.
What is a franchise fee?
A franchise fee is a fee charged by the municipality in exchange for the granting of the right to provide the utility service in the municipality and for the ability to place distribution facilities on municipally-owned lands. The municipality is responsible for establishing the level of the franchise fee through the franchise agreement with the Alberta Utilities Commission (AUC). The AUC approve and finalize the franchise agreement and the franchise fee established.
Who does the Town of Okotoks charge franchise fees to?
In Okotoks, franchise fees are charged to Fortis Alberta Electricity and ATCO Gas and Pipelines Ltd for their use of municipal lands for their distribution delivery systems (power and gas lines). Franchise fees apply to all customers that receive gas and electricity services and are billed as a separate charge on utility bills.
Why does the Town have franchise fees?
Franchise fees help pay for many of the services that a municipality needs. These fees help reduce some of the challenges faced in the regular budget process. These challenges include a need for increased service levels to Okotoks Transit and Okotoks Fire & Rescue, inflation, supply chain difficulties, etc.
Why is Council considering an increase to franchise fees?
An increase in franchise fees often lowers a required tax increase, as not all utility consumers pay taxes. It is an opportunity to increase revenue more equitably, as nearly all organizations use utilities, but not all organizations pay property taxes. Franchise fees are one of the ways a municipality can reduce the tax burden, as it provides a stream of revenue that accesses properties that are otherwise exempt from property taxes such as schools, healthcare facilities, places of worship and non-profit organizations.
How will the proposed increase in franchise fees affect the average property owner?
Utility providers charge back the franchise fee costs to their customers: residents, businesses, agencies and others who use electricity and gas. If approved by Council, the average homeowner would likely see an increase of about $81.81 per year or $6.82 per month.
Proposed franchise fee timeline:
The franchise fee increase was included in Bylaw 36-23, which had first reading by Town Council on September 25, 2023. Second and third reading is scheduled for December 11, 2023. Approved rates would be in effect for January 1, 2024.
What is the maximum franchise fee rates allowed?
The Alberta Utilities Commission has set the maximum franchise fee rates at 35% for natural gas and 20% for electricity.
Historical increases/changes?
ATCO Gas |
January 1, 2024 | Proposed Franchise Fee rate = 35% |
January 1, 2021 | Approved Franchise Fee rate = 20% |
January 1, 2019 | Approved Franchise Fee rate = 16% |
Fortis Alberta Electricity |
January 1, 2021 | Approved Franchise Fee rate = 20% |
January 1, 2019 | Approved Franchise Fee rate = 18% |
January 1, 2017 | Approved Franchise Fee rate = 10% |
Gas Franchise Fees Municipal Comparisons
Municipal Comparisons (2023 Rates) |
ATCO Gas Alberta Customers | Percentage | Effective Since |
Strathmore | 35.0% | April 4, 2021 |
Spruce Grove | 35.0% | January 1, 2023 |
Vulcan | 35.0% | January 1, 2014 |
Edmonton | 35.0% | January 1, 2019 |
Red Deer | 35.0% | January 1, 2017 |
Banff | 31.20% | January 1, 2022 |
Canmore | 30.0% | January 1, 2021 |
Airdrie | 29.6% | October 1, 2007 |
Lacombe | 27.75% | January 1, 2022 |
Camrose | 27.0% | April 1, 2020 |
Lethbridge | 27.0% | February 15, 2012 |