Calgary City Council Pursues Additional Revenue from ATCO Gas Franchise Fees
After a lengthy, confidential discussion last week, Calgary city council approved a directive to consider amending the city’s franchise fee methodology for natural gas. The goal is to collect millions more in additional revenue from utility providers, specifically targeting an extra $25 million from ATCO in 2027.
Mayor Jeromy Farkas clarified that the move does not guarantee the full amount will be collected. “It’s not a confirmation that $25 million more will be collected, but I think our council is opting to pursue more from franchise fees, in keeping with population growth,” he said. Farkas emphasized that even if the target is achieved, Calgary’s rates would remain competitive compared to Edmonton.
Proposed Changes to Fee Calculation
The vote directs city administration to analyze the impacts of switching the current franchise fee calculation to the “distribution tariff” methodology. The analysis must be completed in time for council’s last regular meeting of December. The motion also calls for increased target revenue from Enmax and ATCO local access fees.
Franchise fees, also known as Local Access Fees, appear as charges on ratepayers’ monthly utility bills. Utility providers like Enmax and ATCO pay these fees in lieu of property taxes to access municipal distribution infrastructure.
Background and Regulatory Context
Mayor Farkas noted that the Alberta Utilities Commission (AUC) currently allows for higher franchise fee collections than Calgary opts to collect. “We’re targeting a certain amount, but a lot of that is up in the air based on the regulatory proceedings that occur at the AUC,” he said.
In 2024, the previous city council fast-tracked changes to the electricity franchise fee formula after volatile wholesale electricity prices caused unbudgeted surpluses of roughly $200 million. Those surpluses occurred because the old formula was partly tied to the regulated rate option. The Alberta government later renamed that option to the rate of last resort to discourage consumers from choosing it.
Current Electricity Fee Structure
Calgary now uses a quantity-only method for electricity franchise fees, which proponents say provides more stable and predictable budgeting and more affordable electricity. Under this method, customers pay a fixed rate based on energy usage, such as a set amount per gigajoule of natural gas or per kilowatt-hour of electricity.
The city council’s latest directive aims to apply a similar stable approach to natural gas franchise fees, with the goal of increasing revenue in line with population growth while maintaining affordability for ratepayers.
