Council votes to increase electrical and natural gas franchise fees

By Sean Feagan, Local Journalism Initiative Reporter

Strathmore residents and institutions will notice an increase on upcoming utility bills starting in July, as council has voted to increase electrical and natural gas franchise fees.
Franchise fees are payments that municipalities charge utility distributors, specifically Fortis Alberta and ATCO Gas, for having infrastructure such as pipelines and transmission lines on municipal land. These charges are collected during billing by the distributors, who later forward the payments back to the municipality.
On Feb. 19, Strathmore town council voted to increase the town’s electrical franchise fee from 16.25 per cent to 20 per cent, as well as the municipal natural gas franchise fees from 24 per cent to 29.6 per cent in separate motions. Each motion passed unanimously with four votes in favour from council.
The franchise fee adjustments were accepted via provisions within the 2020 town budget package that was approved by council in December 2019. Determining the level of the fee increase was based on the projected revenue from the fees within the budget and current commodity prices, explained Mel Tiede, director of corporate services.
“The franchise fee revenue is based on the commodity sold and built by the two franchises, (of which) the market price varies,” said Tiede.
“So the value of the fee increase is based on the anticipated revenue from each franchise fee projected in the 2020 budget.”
The increase to the electrical franchise fee will increase the average monthly residential fee from $10.51 to $12.93, an increase of $2.42 per month, based on an average residential use of 640 kilowatt hour (kWh) per month, said Tiede.
The average residential fee for natural gas will increase from $10.27 to $12.67, an increase of $2.40 per month, based on an average residential use of 115 gigajoules (GJ) per year, as reported by Tiede.
The fee increases will take effect July 1, 2020.
While fee increases are never popular among constituents, the increase is necessary to keep up with municipal infrastructure costs, said Strathmore town Councillor Denise Peterson.
“There is always concern, especially with consumers who are on a fixed budget,” said Peterson. “This council made a distinct commitment to reflect in our budgets usage so that we can keep up to infrastructure costs that has been long ignored in the community.
“Paying for the cost of business is always difficult.”
Councillor Jason Montgomery, who “grudgingly” proposed the motion, said the fee increase will help the town gain funds from provincially-funded institutions, namely schools and seniors’ lodges, that do not pay property taxes.
“The only thing that makes this kind of palatable is that other government institutions and other institutions do not pay property taxes in our town,” said Montgomery.
The move will therefore help stymie the need for any municipal tax increases to meet budgetary requirements.
“By increasing our franchise fees, we are able to actually capture some revenue from those institutions,” he added. “As much as I loathe the idea of increasing fees this does work to keep our taxes a bit lower.”