City raises Fortis franchise fees for third consecutive year

Airdronians will be faced with higher electricity charges in the new year. Council voted to increase FortisAlberta franchise fees by two per cent, Sept. 17. It also increased Fortis’ franchise fee cap from 10 to 15 per cent.

Currently, the Fortis franchise fee is set at eight per cent. The additional fee, which will mean an increase of 92 cents on the average homeowner’s bill, will result in an additional $292,000 in the City’s coffers, money badly needed to balance next year’s budget, according to Lucy Wiwcharuk, of the City’s finance department.

The staff report stated the first draft of the 2013 operating budget indicates a deficit of $5 million.

“We have X amount of services we offer to our residents,” said Wiwcharuk. “At the end of the day, we need to have a balanced budget.”

According to a staff report, franchise fees allow municipalities to collect money from all electricity users.

“This revenue is essentially a user fee as franchise fees apply to a different customer base including renters, schools, churches, senior’s facilities and Federal and Provincial governments that are exempt from taxation,” stated the report. “It helps to spread the burden to more than just the property owner.”

The City’s agreement with Fortis was established in 2005, with a fee of zero per cent and an initial cap of 10 per cent.

In 2011, council revised the agreement to five per cent. In 2012, it was increased to eight per cent.

The franchise fee revenue for nine months of 2011 was $504,265 and is estimated to be $1.2 million in 2012.

According to the staff report, municipalities across the province charge Fortis franchise fees ranging from zero to 20 per cent.

City staff recommended the franchise fee be increased to 15 per cent, with the cap raised to 20 per cent to help alleviate 2013 budget pressures.

The increase was expected to have brought in an additional $1.02 million in net revenue to the City and would have added an additional $3.22 to the average customer’s bill each month.

Council disagreed with the staff recommendation and Alderman Kelly Hegg made a motion to increase the franchise fee to 10 per cent.

“I think this (staff recommendation) is quite a jump,” said Hegg.

Mayor Peter Brown said he was against the higher increase because he doesn’t yet know what he is dealing with in the 2013 budget

“It’s hard to raise it up when you don’t know what you are raising it up for,” said Brown, adding Fortis requested council inform them as soon as possible whether there would be any increase in the franchise fee.

“I have no detail on the budget yet,” said Brown. “We are (taking) a leap of faith.”

The ATCO Gas franchise agreement is set at 29.6 per cent and staff recommended leaving it as is.

The motion carried, with Alderman Fred Burley the sole vote in opposition. Alderman Allan Hunter was not in attendance.

To comment on this story, visit www.airdriecityview.com