Councilors approve quantity-only model for local access rates

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Citing the increased stability and predictability it will provide to future budgets, Calgary City Council voted Monday to pursue a new model for determining its local access fee (LAF).

The new formula, which the administration will introduce in January 2027 pending approval from the Alberta Public Service Commission, will see Calgary councilors set an annual rate to target a specific revenue amount based on projected revenue numbers. electricity and natural gas consumption.

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The council’s direction differs from the status quo in which the city currently ties a portion of its LAF (also known as a franchise fee) to the province’s regulated rate option (RRO) for electricity.

The current method has led to the city collecting higher-than-expected rate revenues in recent years, due to the fluctuating nature of the RRO and rising electricity prices since 2021.

Councilors debated the merits of the lump-sum model, which staff said will provide more predictable revenue for the city and less variable bills for consumers.

But not all councilors were in favor of the staff recommendation. Count. Terry Wong asked what was going wrong: the city has been using the same methodology successfully since 1974 with only a few volatile years between them.

Councilors Peter Demong and Jennifer Wyness asked why management was coming to council to make a decision now, considering the provincial government is reviewing the RRO.

Wyness compared Monday’s discussion to making a decision “without all the facts on the table.”

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Carla Male, the city’s chief financial officer, responded that creating a model with more stability is “critical” and that the current formula is creating “large swings” in the amount electricity users are charged and how much the city collects.

Other councilors were in favor of the new model. Count. Evan Spencer, who ultimately approved the staff recommendation, noted that the council has reviewed the franchise fee formula eight times since 1991.

But considering Alberta’s volatile electricity market in recent years and the effect the RRO has recently had on the utility bills of Calgary’s large asset holders, Spencer argued now is the right time to seek change.

“Let’s turn the corner and give the administration the direction needed today to turn that corner,” he said.

“It is premature for us to move forward,” says the dissident councilor

Count. Andre Chabot, who has long touted the benefits of the current model, filed a referral motion to send the article back to the administration for a scoping report to determine how much it would cost the city to make the change.

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Chabot said he recently spoke with Alberta Minister of Public Services and Affordability Nathan Neudorf, who told him legislative changes to the RRO would be announced “within weeks.”

“Given that there is a decision that is imminent. . . Even if it takes a month, I think it’s premature for us to move forward with something that has proven the test of time,” Chabot said.

And while he acknowledged that a volume-based model would provide more certainty to the city’s revenue stream in the future, Chabot added that the current model is more responsive to market changes.

“When prices rise and we have to incur higher costs, our LAF increases,” he said. “When prices go down, our LAF goes down and our prices go down, so we don’t have to save as much.”

Chabot’s referral motion narrowly failed, 7-8, with councilors Wyness, Wong, Demong, Sean Chu, Dan McLean and Sonya Sharp voting with him.

“Certainty versus windfall”

Count. Kourtney Penner said council should not wait or base its decision on the results of the provincial review.

“I think we’re at a decision point and we often make decisions without knowing what the province can do,” he said. “Even in our budgets, we often don’t know what provincial grants we will receive, but we make budget decisions all the time.”

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After rejecting Chabot’s recommendation, the council collectively voted 12-3 in favor of following the lump sum model. Council members Chabot, McLean and Chu voted against.

The city administration will now work to implement the model by January 2027, to better align with the city’s budget cycles.

“If it gives us peace of mind that we will not have to experience what we experienced in the last two years. . . “I think it’s worth it,” Coun said. Courtney Walcott, adding that she felt the council could have made the same decision in December.

“We’re in the same place now: certainty versus windfall,” he said. “As far as the city is concerned, it’s the same thing.”

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