'Long overdue' changes to Calgary's volatile electricity fees will arrive on shorter timeline than city proposed

Calgary initially targeted 2027 to implement the changes to local access fees. Alberta’s utilities regulator said similar applications are often handled in three months

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While the province and city dispute how long reforms to the volatile franchise fee will take, Alberta’s utility regulator and experts say the government’s proposed changes can be approved quickly and are “long overdue.”

Calgary’s volatile electricity fee structure will be revamped far ahead of the city’s 2027 target, after the province announced a new bill Monday that will standardize how Alberta municipalities calculate franchise fees on power bills.

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Premier Danielle Smith has accused Calgary city council of dragging its feet to implement the changes, while Calgary Mayor Jyoti Gondek said the city doesn’t have the ability to receive approval from Alberta’s utility regulatory body before 2027.

The Alberta Utilities Commission, meanwhile, says such applications are often processed in a handful of months.

“When (the city’s) applications have come before us in the past to process a change to their franchise fee arrangement, they’ve been processed within three months or two-and-a-half months,” said Geoff Scotten, senior communications adviser for the AUC.

The changes come on the heels of a year in which Calgary’s electricity fees hit shockingly high numbers due to high commodity prices, prompting political pressure on the city and province to reform how users are charged for electricity consumption.

Bill 19 — the Utilities Affordability Statutes Amendment Act, 2024 — proposes a mandate that local access fees not be tied to the default rate and instead be tied to consumption, or as a percentage of transmission and distribution costs.

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The province said the legislation would come into effect next January.

It comes about a month after the city gave the go-ahead to a new “quantity-only” model, which would see the annual rate target a specific revenue amount based on forecasted electricity and natural gas consumption.

City, province dispute timeline

The bill is widely seen to be targeting Calgary’s system. Calgary is the only Alberta municipality to tie a portion of its local access fee, otherwise known as a franchise fee, to market prices, called the regulated rate option (RRO). That method has allowed the city to collect hundreds of millions of dollars in additional revenue from the fee over recent years due to surging electricity prices.

The formula has resulted in Calgary electricity users paying $258 in 2023 in local access fees, compared with $79 by the average Edmontonian, according to data from Energy Associates International (EAI).

It’s unclear how the changes will affect the city’s budget. In its mid-March meeting, council voted to keep private a report on the budget implications of its changes to local access fees until it received further direction from the province.

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Calgary has said it’s targeting 2027 for implementing the changes approved last month, which staff claimed will provide more predictable revenue for the city and less variable bills.

On Monday, Smith said Calgary was ragging the puck by setting its 2027 timeline.

Danielle Smith and Jyoti Gondek
Alberta Premier Danielle Smith (L) and Calgary Mayor Jyoti Gondek. Postmedia files

Speaking outside council chambers, Calgary Mayor Jyoti Gondek said the city’s 2027 timeline is a result of how long utilities would need to get approval from the Alberta Utilities Commission (AUC).

“If (Minister Neudorf) would like to cut that red tape, he certainly can. We have no ability to do that,” Gondek said.

Gondek has previously said revenues from local access fees have been used as a “hedge” for the city as costs go up, acting as an offset for overages that occur. Ward 3 Coun. Jasmine Mian said the issue “is not really in our court anymore.”

The province on Monday called it a “slush fund” for city hall. “They knew that they were charging it this way, they knew it was a problem, they persisted in charging it this way,” Smith said.

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Calgary-based energy consultant Sheldon Fulton said the city’s claim that approvals would take until 2027 is “hogwash.”

“For them to pretend that it takes to 2027 is just pure obfuscation, pure and simple,” Fulton said.

The measures in Bill 19 are “long overdue,” said energy expert Thomas Glenwright, senior director of utilities at EAI. He said while the access-fee formula can provide a boon to city coffers, it also makes the city vulnerable to revenue shortfalls.

“It essentially ensures that there’s a couple guardrails set up while still ideally providing a little bit of autonomy for municipalities to set,” he said.

Business groups applaud government’s new bill

Two major business groups on Monday evening reacted positively to the changes.

The Calgary Chamber of Commerce said it will stabilize and limit the burden of utility fees on both consumers and businesses.

Some Calgary businesses have in recent months experienced increases of more than 100 per cent in their LAF costs, the chamber said. More than 63 per cent of all access fees were paid by commercial customers, it said.

“While more detail is necessary to understand the new calculation format for the LAF and to ensure that municipalities are not unnecessarily impacted due to a decrease in revenue from this recalculation, we are encouraged by the province’s efforts to address these rising costs,” said Ruhee Ismail-Teja, the chamber’s vice-president of policy and external affairs.

In a post to X, the Canadian Federation of Independent Business’ Alberta team welcomed the government’s announcement.

“Businesses pay a disproportionate amount of these fees given their size, equipment and hours of operations,” it wrote, calling on the city to find ways to reduce property taxes for ratepayers given collection of local access fees have exceeded forecasts.

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— With files from Scott Strasser, Matthew Black

[email protected]
X: @mattscace67

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