Franchise Fees and Agreements

What are the Town's Franchise Fees?

• Why does the Town have franchise fees?

  Franchise fees help pay for many of the services that a municipality needs. These fees help reduce some of the challenges faced in the regular budget process. These challenges include a need for increased service levels to Okotoks Transit and Okotoks Fire & Rescue, inflation, supply chain difficulties, etc. It is very common for municipalities to have franchise agreements and to generate revenue from this type of fee.

  It is an opportunity to increase revenue more equitably, as nearly all organizations use utilities, but not all organizations pay property taxes. Franchise fees are one of the ways a municipality can reduce the tax burden, as it provides a stream of revenue that accesses properties that are otherwise exempt from property taxes such as schools, healthcare facilities, places of worship and non-profit organizations.

• Franchise Fees: Question & Answers

  What specific requirements in the Municipal Government Act (MGA) apply to franchise agreements?
  Under section 360 & 45 of the Municipal Government Act, municipalities are permitted to charge franchise fees. The Alberta Utility Commission (AUC) regulates the franchise fee rates in the province.

  How are franchise fees calculated, charged and remitted?
  For electrical and natural gas distribution companies, franchise fees are typically calculated as a percentage of the total distribution charges on a customer’s bill. They are currently capped at 20% for electricity, and 35% for natural gas. For stability, franchise fees are typically not tied to the price of the commodity (electricity or natural gas). The distribution company collects the franchise fee from its customers, through a line item on the customer’s bill typically labelled the “Municipal Franchise Fee” or “Local Access Fee”. The distribution company then remits the franchise fee to the municipality in accordance with the terms of the franchise agreement. 
  
  Who does the Town of Okotoks charge franchise fees to?

  In Okotoks, franchise fees are charged to Fortis Alberta Electricity and ATCO Gas and Pipelines Ltd for their use of municipal lands for their distribution delivery systems (power and gas lines). Franchise fees apply to all customers who receive gas and electricity services and are billed as a separate charge on utility bills.
  
  What are the maximum franchise fee rates allowed?

  The Alberta Utilities Commission has set the maximum franchise fee rates at 35% for natural gas and 20% for electricity.

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  Historical increases/changes?

  ATCO Gas
  January 1, 2024	Approved Franchise Fee rate = 35%
  January 1, 2021	Approved Franchise Fee rate = 20%
  January 1, 2019	Approved Franchise Fee rate = 16%
  Fortis Alberta Electricity
  January 1, 2021	Approved Franchise Fee rate = 20%
  January 1, 2019	Approved Franchise Fee rate = 18%
  January 1, 2017	Approved Franchise Fee rate = 10%

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  Gas Franchise Fees Municipal Comparisons

  Municipal Comparisons (2023 Rates)
  ATCO Gas Alberta Customers	Percentage	Effective Since
  Strathmore	35.0%	April 4, 2021
  Spruce Grove	35.0%	January 1, 2023
  Vulcan	35.0%	January 1, 2014
  Edmonton	35.0%	January 1, 2019
  Red Deer	35.0%	January 1, 2017
  Banff	31.20%	January 1, 2022
  Canmore	30.0%	January 1, 2021
  Airdrie	29.6%	October 1, 2007
  Lacombe	27.75%	January 1, 2022
  Camrose	27.0%	April 1, 2020
  Lethbridge	27.0%	February 15, 2012