Town increases natural gas and electricity franchise fee

By Miriam Ostermann, Associate Editor

With the future of provincial revenue funding uncertain and to align Strathmore with its surrounding communities, town council approved a franchise fee hike for natural gas and electricity to help bolster their long-term financial planning strategy.
During the last regular council meeting on Feb. 21, council adjusted the electricity franchise fee to 15 per cent from 13.5 per cent. The average monthly residential franchise fee was therefore increased to $8.88 from $7.79 or the equivalent to an additional $1.09 per month per household.
Council also modified the natural gas franchise fee to 20 per cent from 17.22 per cent, or an increase to $8.59 from $7.49.
By adopting the increases, the additional funds will help to offset an $807,000 shortfall in the current 2018 budget. The 2018 long-term financial plan and the 2018 budget included provisions for adjustments to the natural gas and electricity franchise fees.
“We have put in small increases over the next couple years, and because we’re not at a balanced budget there is a need to increase each of the revenue streams; until we get to a point where we’re putting some money away, we’ll be looking at different options,” said Mel Tiede, director of corporate services for the Town of Strathmore.
“The idea was to not cause a burden on the homeowner. We have our (budget) and we try to work within those parameters that we have. We’ve established this long-term financial plan and we’re trying to work within it and do the best we can and take the high road.”
The franchise fee is the rent being paid to municipalities for power lines and gas lines located on municipal property.
Last year the electricity fees accumulated $858,000 in revenue, and $443,800 was collected in revenue from natural gas. Funds had previously been used from reserves to balance the current budget, but Mayor Pat Fule stated that council wants to move away from using reserves and prepare for the future.
“I know this is another bitter pill for people to swallow, and in essence it helps us to try and stay away from using reserves,” said Fule during the regular council meeting. “We have so few revenue streams that we can use, this has to be one of the ones we consider as far as helping us maintain our budgets and still provide services to people. We all will be facing it, but at least it’s a small one and we’re trying to keep consistent with other communities.”
Franchise fees and utilities are the only source of revenue from provincially-funded institutions for the town, and are paid by all utility consumers. All provincial-funded institutional schools and senior lodges pay no property taxes. Tiede also noted there was a decrease on the average property taxes from 2014-2017 by $90 per property, based on a $300,000 assessment. The taxes were reduced to $2,439 in 2017 from $2,529 in 2014.
“What happens ultimately is that it all trickles down to the taxpayer and the efforts of this council to do this long-term planning under Mel’s direction is a new undertaking … in the end it’s going to keep us from facing high tax increases like our neighbours have faced,” said Councillor Denise Peterson. “We’ve been able to avoid that for many years, before I was on council, and I understand this is going to be a $26 a year hit to residences, but it’s far from being reactive to the market place where things are so uncertain. Ultimately it’s the taxpayers that pay the bill.”
Councillor Jason Montgomery was also concerned about future rate increases over the next three years and wanted more information on the formula being used to calculate the increases.
According to administration, the current numbers received from Fortis Alberta include Airdrie’s electricity franchise fee rate at 13 per cent, Brooks at 13.63 per cent, Chestermere at 11.5 per cent, High River at 20 per cent, and Cochrane at 15 per cent. The increase to the electricity franchise fee is expected to equate to $150,000 for the current year. In regards to natural gas, Airdrie’s rate is at 29.6 per cent, Brooks is at 18 per cent, Chestermere is at 17 per cent, Cochrane is at 20 per cent and High River at 13 per cent.
“There is concern that Municipal Sustainability Initiative (funding) is going to change on us and it will have significant impact on us,” said Strathmore Chief Administrative Officer James Thackray. “We hope for the best but we know there’s going to be some changes and it’s going to require more revenue. We can argue there’s lots of things we’ll try to advocate with Edmonton and Ottawa, but we need to be prepared and that’s why we put forward this long-term financial strategy.”
With the absence of Councillor Lorraine Bauer, council unanimously approved to adjust the franchise fee for electricity to 15 per cent and that the franchise fee for natural gas be adjusted to 20 per cent.