City council took the first steps towards changing gas franchise fees in a way that could lead to higher prices for consumers.
In a split vote, councillors approved a new methodology for calculating the gas franchises fee the city charges to ATCO gas.
The fee is passed on to consumers and is the city’s charge for ATCO’s use of utility rights of way and property.
Municipalities who charge the fees have two options for how to calculate it.
They can either charge ATCO a percentage of the total gas bill, which includes the fluctuating price of natural gas or they can charge based only on a percentage of the cost of delivering natural gas. Councillors approved using the second option.
City administration recommended the change, because over the last few years with widely fluctuating gas prices estimating the amount of revenue the city would collect has been difficult.
In 2009, the city budgeted for $1,745,300 in revenue but received only $1,132,340, because the price of natural gas fell.
Councillors also proposed a rate for 2011 of 18.8 per cent that will still have to be approved during budget deliberations after the election.
If passed, the new method and the new rate will combine to add an additional $26.88 annually on to the average residents’ gas bill. It will also predictably give the city the same amount of revenue as they budgeted for in 2009.
Coun. Gareth Jones, who along with James Burrows voted against the change, said the new method is simply a way of trying to keep a high level of revenue coming in.
“What was being proposed and was passed was that we should change the formula so that we can go back to the same level of revenue and I don’t agree with that.”
He said gas prices and electricity rates fluctuate and sometimes there is a benefit to the consumer, which the city is trying to work around.
“In normal life if there is a drop in electricity or gas, the consumer benefits, so what we are doing here is that because it is not to the advantage of the city. We are applying a new formula to make up for it.”
St. Albert Mayor Nolan Crouse said council could have just as easily increased the rate charged on the old method, but this method eliminates the uncertainty.
“We could have increased the other method as well so this doesn’t start us down a process any more than the other,” he said. “It is not changing the rate, it is just levelling out the risk.”
The 18.8 per cent rate will be forwarded to the full budget and Crouse said council could decide then to raise it or lower it.
The formal change to the rate will have to be done through an advertised bylaw change later this year.
