Local Access Fees are One Thing; Franchise Fees are Another

By: Darren Chu

In 2023, the City of Calgary is estimated to collect $450 million dollars from Calgarians under the heading of Local Access Fees and Franchise Fees. That’s almost half a billion dollars (GST taxable, no less) being collected from Calgarians when costs are soaring and affordability is top of mind.

Calgary’s Mayor is focused on the ENMAX Local Access Fees; we ask her and City Council to remember they also have a deal with ATCO to collect Franchise Fees. Mayor Gondek, when you get together with your team in September, don’t forget to look at cutting this extra charge as well.

How is this possible? For every site serviced with natural gas, ATCO Gas collects a “Franchise Fee” on behalf of the City and remits it to them as revenue. You probably noticed this line item on your natural gas invoice but didn’t know what it was for. Last year, the City collected $102 million from Franchise Fees, which is not shocking in and of itself; rather, this $102 million represents more than 30% of the total Franchise Fee revenue ATCO collected for the entire province (and then remitted to municipalities)!

Let’s look at one of Calgary’s 439,627 natural gas customers. In the month of July, this customer paid $7 for their gas usage, but the Franchise Fee accounted for more than 50% of the energy cost. Let’s also consider that this example is a summer month. What happens when winter hits and natural gas usage increases? Not only is gas usage seasonal, it’s also essential.  

Now consider Franchise Fees over the whole year. Last year, each Calgarian paid an average of $230 in Franchise Fees alone! For many, that’s more than an entire month’s bill. Instead of handing out rebates, the Government of Alberta could have saved consumers an estimated billion dollars by directing municipalities to reduce their Franchise Fee and LAF revenues. 

The Premier has tasked Minister Neudorf to look for ways and means to reduce all the extra fees added to consumers’ utility bills. By all appearances, he has two options: Take the mantle of “Affordability” literally and help consumers, or bend to the will of big utility companies who continue to overcharge despite clear calls for help. It’s a billion-dollar decision. All it took was an order-in-council to make major changes to our industry this month. We ask the Minister, what are you waiting for?

If you compare Calgary to Edmonton, the Local Access Fee calculation is significant. EPCOR uses a flat calculation that does not vary from month to month with the Regulated Rate Option (RRO), which means their Local Access Fee is much lower than Calgary. They make up for it through higher Franchise Fees on natural gas.

In Calgary, customers are hit three times: once on the volatile Local Access Fee for electricity, a second time on the Franchise Fee for natural gas, and a third time because they have to pay GST on both.

Mayor Gondek aims to convene the City Council to look at Local Access Fees this September and how they’re calculated. That’s a great start, and we commend her for taking action on this, but it’s only part of the story they should be discussing. When you factor in Franchise Fees, the total comes to just under $500 million, a lot of money that Calgarians could be using themselves to fight inflation and help vulnerable people in our community lower their utility bills.

In next week’s blog, we will show you how ENMAX, backed by the City of Calgary, spent $1.8 billion on an investment in Maine, USA. ENMAX is seemingly flush with cash, yet they continue to pick the pockets of Calgary consumers who don’t know solutions exist. Ask yourself, why didn’t the City spend all that money here in Calgary to improve the quality of life of Calgarians?