The Town of Okotoks is considering a billing increase for natural gas customers that would show up on bills beginning next year.
The Town is proposing to increase the natural gas franchise fee paid by customers from 20 per cent of delivery charges to 35 per cent, which the Town said would add about $82 to the average natural gas customer's annual bill.
Okotoks CAO Elaine Vincent said the proposed fee increase is a step in upcoming budget deliberations that are taking place this fall.
The proposed increase to the natural gas franchise fee bylaw was given first reading as part of the consent agenda at Okotoks’ council meeting on Sept. 25.
Franchise fees are a revenue source for the Town that help pay for services, Vincent said.
“Council, right now, has a lot of pressures that they're facing,” she said.
They are looking at increased costs for RCMP, fire services and for transit, she said.
“Council has a choice then, do we increase the franchise fee or increase taxes?” she said.
Information on a franchise fee FAQ page at okotoks.ca says increasing the fee can help achieve fairness to taxpayers and utility consumers, and can mean a smaller increase in property tax.
Increasing franchise fees spread out the increase, because entities that don’t pay property taxes do pay utility bills, Vincent said, such as schools, churches and tax-exempt non-profit groups.
“We have a bigger base to draw from when we do a franchise fee increase versus a tax increase,” she said. “And that way then, it reduces the impact to the overall tax base.”
There has been strong backlash against the proposal on social media, after a notice was published in the Sept. 27 edition of the Western Wheel.
The franchise fee is also called a municipal consent and access fee.
It is set by municipalities and approval is needed from the Alberta Utilities Commission before an increase takes effect.
The franchise fee is a percentage of delivery charges, and Okotoks is proposing to increase the fee to 35 per cent, which is the maximum allowed.
The delivery charges on a typical gas bill include a distribution charge, a load balancing deferral account rider and a transmission service charge rider.
Currently, a customer who has a monthly $30 distribution charge, a load balancing deferral account rider of $0.20 and a transmission service charge rider of $2.35 pays a franchise fee of $6.51 per month to the Town.
If the increase takes effect, the monthly franchise fee would increase to $11.40.
The Town said the average customer would see an annual increase of just over $80.
Town documents estimate that if the franchise fee does not increase, it will generate an estimated $1.4 million in revenue in 2024.
Vincent said if it is increased, the Town could expect to see an additional $1 million.
“The important thing to know on the franchise fee piece is council just gave first reading to the bylaw," Vincent said.
A decision to move ahead with the fee increase or abandon it will come after a budget debate scheduled for Nov. 27, she said.
A comparison of municipal natural gas franchise fees shows that Strathmore and Vulcan charge 35 per cent, Airdrie charges 30 per cent, Lethbridge charges 27 per cent and High River and Cochrane both charge 20 per cent.
Okotokians have until Oct. 20 to submit feedback on the proposal by contacting the Town of Okotoks Finance Division at [email protected].
