Town opts to keep franchise fee at current rate

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by Ashley Janes

Council voted 6-0 in favour of maintaining the 20 per cent Fortis Alberta franchise fee during the Sept. 23 Council meeting, effectively ensuring an expected income of more than $840,000 for 2015.

Utility franchises such as Fortis pay a fee to the local government in order to acquire the rights to operate within the municipality. Director of Financial Services, Andrew Isbister, explained that Fortis Alberta has the only access for carrying electricity to residents in Morinville. “Another company can’t come in and say, well, we’re going to provide electricity – the actual wires – to [residents]. We’ve given a monopoly to Fortis for that and we have a franchise fee that’s provided, meaning up to 20% for Morinville.”

In turn, Fortis Alberta customers pay them a fee as compensation rather than paying into municipal taxes. Then a cut of this fee goes to the Town. As Morinville is currently sitting at the cap limit of 20 per cent, Council was presented with the option of either decreasing the fee or keeping it the same.

A report presented to Council by Administration projected that the funds from the 2015 Fortis Alberta franchise fee would provide as much as $843,436 in Town income, an increase of $50,475 over 2014. However, maintaining the fee would mean the residential customer would see an average monthly increase on their utility bill from $66.36 to $74.97 per month, or about $8.00 per month. Of that amount, about $1.70 would go to the Town with the remainder going to Fortis fees.

The report continued, stating that each 1 per cent reduction in the franchise fee from the current 20 per cent would result in a $42,171 decrease in Town income. For example, a 15 per cent reduction would cause a loss of up to $210,859. But, in this case, the residential customer would see a savings of up to $3 per month.

Isbister emphasized that the increase was not tied to the franchise fee. “There would still be a small increase because there would be a tariff increase as well. This is a percentage only on the carrier portion of the utility bill, it doesn’t affect the amount of electricity a person uses.”
Councillor Boutestein was concerned that the decision felt like a catch 22, being that a potential reduction in residential costs would equal a significant loss of income for the Town who would have to compensate for it some other way.

Isbister explained that the alternative source of revenue would be through municipal taxes. He also pointed out additional benefits that a tax increase would not have access to. “[The Fortis Alberta fee] does allow us a method of obtaining some revenue from churches, from schools, the school districts themselves, who are exempt from taxes. So they do contribute a little bit through the franchise fee.”

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