Announced in March 2024 by the Alberta Government as a future initiative that would be launched in 2027, the changes to the Franchise Fee were applied more than two years earlier by the City of Calgary to make energy bills more affordable and less volatile especially in extreme temperatures – summer and wintertime, when residents consume more electricity and natural gas.
Another reason why the timeline was accelerated to Jan. 2025 was to make sure the city follows the Utilities Affordability Statutes Amendment Act*, which was passed by the Government of Alberta in June. However, to better understand what and why this happened, many energy factors contributed to this scenario – and the higher rates are the main point of the transition.
To have a better view, in Calgary, the local access fee used to be charged 11.11% of the RRO (Regulated Rate Option), plus 11.11% of transmission and distribution costs. But the fluctuating nature of RRO and this higher percentage is reflected in utility bills in the city, as we can check the numbers. According to data from September 2023, while Edmonton charged the local access fee at 1.05¢/kWh consumed, Calgary charged 2.72¢/kWh, which was a 159.05% higher fee.
How will Franchise Fees be calculated?
Calgary has tied the Local Access Fee to electricity prices since the late 1990s, which means they are paid by companies instead of property taxes. In return, they get access to infrastructure and right of way for power and gas lines. Those fees are passed onto taxpayers as part of their monthly power bills.
After the change, the rate won’t be directly tied to RRO energy prices, which are prone to volatility. To avoid monthly surprises on utilities city councillors will set an annual fixed rate to the LAF to target a specific revenue amount based on forecasted electricity and natural gas rates. According to the Government, the new “quantity only model” will provide customers with more clarity and predictability on their bills and financially incentivize consumers to reduce their electricity and natural gas usage.
Starting January 1, 2025, Calgary’s franchise fee for electricity will be calculated at a fixed rate of $0.015507/kWH. This rate is expected to drop the city’s average customer franchise fee by 30%, decreasing the monthly charge from $11.24 to $.7.91. At the moment, the new rate does not apply to the current natural gas franchise fee, it only applies to electricity.
When will the initiative be effective?
In Jan. 2025 Calgarians can see the initiatives reflected on their utilities. To make it happen, the city will work with ENMAX and ATCO to get the billing changes implemented and notify customers, ahead of the change. After those negotiations are finished, a submission will be made to the Alberta Utilities Commission (AUC) for review and approval.
The final step will be for the city, ENMAX, and ATCO to work together on implementing the changes to billing systems and notifying customers.
The Utilities Affordability Statutes Amendment Act
In the second paragraph, we said that the initiative was accelerated to make sure the city follows the Utilities Affordability Statutes Amendment Act. Let’s better explain this part. In April, the Alberta government started to work on protecting the province’s ratepayers aiming to stabilize local access fees which would work to save money for Calgary residents.
The Premier Danielle Smith said at that time the Affordability Statutes would “promote long-term affordability and predictability”, and that “the way local access fees are calculated in Alberta is inconsistent”. Thus, evaluating the benefits and current energy rates, the city decided to advance its plans.
But that wasn’t the only change. Trying to improve the energy rates system across the province, the proposed legislation also gave the Alberta Utilities Commission stronger regulations announcing the Rate of Last Resort — instead of the Regulated Rate Option (here you can find all you should know about it) to provide more clarity to encourage energy consumers to explore retail energy options and better understand how the energy market works in the province.
