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Calgary anticipating $100M jump in franchise-fee revenue from high energy prices

Click to play video: 'Calgary anticipating $100M jump in franchise-fee revenue from high energy prices'
Calgary anticipating $100M jump in franchise-fee revenue from high energy prices
WATCH: Soaring electricity prices are boosting the City of Calgary's bottom line. As Adam MacVicar reports, the higher revenue comes from a fee that moves up or down based on the price of energy. – Sep 7, 2023

The City of Calgary is estimating it will end this year with another multi-million dollar surplus, due in large part to additional revenue from  higher energy prices.

According to a mid-year performance report presented to city councillors this week, city officials estimate a year-end surplus of $175 million; a combination of $75 million in operating savings, and an additional $100 million in revenue from franchise fees.

$93 million of that extra franchise fee revenue is expected to come from electricity bills, with the rest coming from natural gas bills.

The city is attributing the growth in the revenue from the fees to the soaring default price of electricity in Alberta — otherwise known as the Regulated Rate Option (RRO).

In Calgary, the fee charged on monthly electricity bills is based on the cost of electrical infrastructure to deliver power to customers, and the cost of the energy consumed, which is based on the RRO price.

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September’s RRO rate in Calgary is 26.455 cents per kilowatt-hour (kWh), after reaching a high of 31.858 cents last month.

That fee rises when the RRO price goes up; it’s collected by Enmax and delivered to the City of Calgary.

Calgary’s mayor and city council will be briefed on the fee structure and possible next steps at next week’s council meeting amid affordability concerns.

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“We need to look at whether we’re doing the right thing right now for people struggling with affordability,” Calgary mayor Jyoti Gondek said Thursday.

“It’ll be a conversation about some history, some other best practices, and then making some decisions moving forward.”

However, some councillors are cautioning against making changes to the local access fee on electricity bills as a result of Tuesday’s briefing.

Ward 10 Coun. Andre Chabot said Calgary uses the same methodology for the fee on both natural gas and electricity, and changing one would be “picking winners and losers.”

Instead, Chabot wants to see changes to the process the Alberta Utilities Commission uses to determine the RRO price to avoid large fluctuations.

“If we looked at the process to determine that regulated rate option, that would be the best thing to do,” Chabot told Global News. “Changing our policy is not going to be that beneficial in the end.”

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As discussions continue around affordability and measures to provide relief to those struggling, there remain questions around how city council will use the surplus funds.

Gondek said the figures presented Wednesday are only mid-year estimates, and the city won’t know exactly how much the surplus is, or determine how to use it until the end of the year.

According to the city, excess franchise fees are required to be moved into the capital reserve for infrastructure projects like accessibility improvements for pedestrians and facilities, and lifecycle maintenance for recreation and parks infrastructure.

Last year, the operating surplus was used to help fund Calgary’s Mental Health and Addiction Strategy, Calgary Fire Department response times and made transit free for kids under 12.

However, some city councillors are eyeing potential returns for Calgarians in need of support with affordability.

“Across our city there’s people who are insulated from it and then there are others getting hit with it day after day,” Ward 12 Coun. Evan Spencer said.

“The city is in a place where we can potentially look at very specifically targeting that money to where it will have the best impact.”

Earlier this week, elected officials in Medicine Hat approved an interim program that would provide relief credits on electricity bills up to $800 for residents and $2,000 for small and medium businesses over the next four months.

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Both Chabot and Spencer noted a rebate program could have administrative challenges, as well as fairness and equity issues.

The discussion on the local access fees on electricity bills in Calgary will take place during Tuesday’s city council meeting.

Click to play video: '‘People are in dire situations’: Calgary mayor eyes changes to energy bill fees'
‘People are in dire situations’: Calgary mayor eyes changes to energy bill fees

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