Changes to electricity and natural gas franchise fees
We’re updating our franchise agreements with ENMAX and ATCO. This will change how we calculate franchise fees (also known as Local Access Fees on electricity bills). The proposed change will make fees more stable and transparent for Calgarians than they are today.
These are not new fees; we're improving how we calculate them.
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What are franchise fees?
A new franchise fee model: Quantity only
On March 18, 2024, Council approved changing how we calculate franchise fees on utility bills. This was in response to rising utility costs and affordability concerns of Calgarians. We will use a quantity only model to calculate franchise fees for electricity starting Jan. 1, 2025 and natural gas starting Jan. 1, 2027, subject to AUC approval.
It means for every kilowatt-hour (kWh) of electricity or gigajoule (GJ) of natural gas, a small fee is added. Currently, we calculate franchise fees based on the total bill. It’s a complicated formula and the amount customers pay varies with unpredictable energy rates.
The quantity only model was developed by The City over the past two years. It’s a new and innovative way to calculate franchise fees offering these benefits:
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Provides consumers with clarity, predictability and control around franchise fees. Fees will be a transparent fixed rate tied to the amount of energy consumed, not volatile energy prices.
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Encourages consumers to reduce their energy consumption. This benefits both their finances and the climate.
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Allows The City to meet its budget targets. This minimizes the risk of collecting more or less than we need and provides stable revenue to fund services.
Proposed franchise fee rates
ATCO
ATCO
| Current | Proposed |
|---|---|
|
11.11 per cent of Delivery Tariff charges + 11.11 per cent of monthly gas cost (variable Gas Cost Flow-Through Rate x gigajoules consumed*). |
11.11 per cent of Delivery Tariff charges + 11.11 per cent of monthly gas cost (fixed rate of $3.15 per gigajoule x gigajoules consumed*). Starting Jan. 1, 2027, we’ll calculate the franchise fee using the quantity only method: Fixed rate per gigajoule x gigajoules consumed*. |
ENMAX
ENMAX
Approved electricity franchise fee rate starting Jan. 1, 2025
$0.015507 per kilowatt-hour (kWh) consumed
*The calculation for high and ultra-high use customers will use a demand forecast.
The Alberta Utilities Commission has set caps of 20 per cent of Distribution Tariff charges for electricity and 35 per cent for natural gas.
Household impact
ATCO
ATCO
The average monthly franchise fee for a residential consumer is forecast to be $8.33 per month in 2025, up $1.08 per month. This would be a 1.5 per cent increase on the total natural gas bill.
This increase is in part the result of low natural gas commodity prices in 2024. Using a fixed rate for natural gas will remove uncertainty and create a more stable and predictable natural gas franchise fee.
ENMAX
ENMAX
The average monthly franchise fee for a residential customer is forecast to be $7.91 a month in 2025, down 30 per cent from an estimated $11.24 a month in 2024.
The new fee will be much more stable, varying with energy usage only – not the market price of electricity.
Franchise fees make up a small percentage of the average utility bill (typically less than 10%).
The City estimates that, for an average residential customer, the electricity franchise fee will decrease by about $3.33 per month while the natural gas franchise fee will increase by about $1.08 per month.
Status of applications
The City works with our partners ENMAX and ATCO to apply for new franchise agreements. These applications are sent to the Alberta Utilities Commission (AUC) for review and approval. Learn more about the AUC process.
ATCO
ATCO
ATCO Gas and Pipelines Ltd., on behalf of The City of Calgary, submitted our application for a new franchise agreement to the AUC on Nov. 27, 2024.
A Public Notice period was held from Oct. 31 to Nov. 20 to gather feedback on our proposed changes.
ENMAX
ENMAX
The AUC approved the new franchise agreement between The City of Calgary and ENMAX on Dec. 17, 2024. The new franchise fee rate will take effect Jan. 1, 2025.
ENMAX, on behalf of The City of Calgary, submitted our application for a new franchise agreement and new franchise fee rate to the AUC on Sept. 27, 2024.
A Public Notice period was held from Sept. 4 to Sept. 26 (extended from Sept. 24) to gather feedback on our proposed changes.
Timeline
FAQs
Is this a new fee added to my bill?
This is not a new fee. Franchise fees are currently charged to customers in Calgary and across Alberta. It’s simply an improvement in how franchise fees are calculated on utility bills. Franchise fees are common among Alberta municipalities. They are an important source of revenue that utility companies pay for the exclusive right to operate within a municipality, and compensates The City for letting utilities build, run and take care of utilities on City land.
Why is Calgary’s proposed franchise fee model different than most other Alberta municipalities?
Since energy prices spiked two years ago, we have been exploring various models to minimize volatility in the small portion of energy bills that The City can influence.
This made-in-Calgary solution has been researched and developed with Calgarians’ best interests in mind. It offers clarity and stability for both consumers and our budgets. The model incentivizes consumers financially to reduce their energy consumption, which is crucial given the Council’s declaration of a Climate Emergency on November 15, 2021.
Moreover, by replacing the variable energy rates used in franchise fee calculations, this solution meets the updated requirements of the Utilities Affordability Statutes Amendment Act, 2024.
How will The City set franchise fees?
Starting this year, Council will set the target amount of franchise fee revenue yearly. Once a revenue amount is set, a charge per unit of energy will be calculated for electricity and for natural gas. Setting fees yearly allows The City to consider and incorporate:
- Changes based on current inflation and population growth.
- Affordability for Calgarians.
- Revenue needed for City services and projects.
Franchise Fee rates will be submitted to the AUC each year for approval.
Why is the natural gas franchise fee increasing?
Natural gas rates have been very low in 2024. Since we currently calculate the franchise fee using the variable Gas Cost Flow Through Rate, the franchise fee has also remained low. Starting in 2025, we’re proposing that we use a fixed rate for natural gas instead of a variable rate, creating a more stable and predictable franchise fee. If we did not make a change, Calgarians would experience a similar increase based on the $3.11 per gigajoule natural gas rate projected in Fall 2024 Calgary & Region Economic Outlook 2024-2029 report.
The City estimates that, for an average residential customer, the electricity franchise fee will decrease by about $3.33 per month while the natural gas franchise fee will increase by about $1.08 per month.
Why are you implementing the quantity only model for natural gas in 2027?
We’re working with our partner ATCO to implement changes that will allow us to calculate the franchise fee using the new quality only model; a model that is in the best interest of Calgarians. The City proposed a two-year timeline, which was agreed to ATCO, to allow for sufficient time to transition to this new model. To protect Calgarians from volatile fees during this transition period, we will fix the natural gas rate in 2025 and 2026.
What are the estimated amounts franchise fees will collect?
Electricity
The updated franchise fee is estimated to generate $143.5 million in revenue for 2025, a $36.7 million decrease from the forecast amount under the existing calculation method.
Natural gas
The updated franchise fee is estimated to generate $69.9 million in revenue for 2025, an $11 million increase from the forecast amount under the existing calculation method.
How are the franchise fee amounts to be collected determined?
The franchise fee amounts are determined based on collecting only what’s needed to fund capital projects to support services. It also considers the 10-year average of actual revenues from electricity and natural gas franchise fees, without adjusting for inflation.