Lisa Holmes, Mayor - Town of Morinville | www.morinville.ca

Municipal Government 101: What are Franchise Fees?

I decided to start up a new series of blog posts called Municipal Government 101. Within these, I will answer questions to items that are on the agenda or in the news for our Municipality. If there is something that you would like to see answered here, let me know!

To start off, tomorrow night at t the October 8th council meeting, we will be making the decision whether or not to keep our Franchise Fee rate the same for 2013. It is currently at 20% as per the Electric Distribution System Franchise Agreement.

What is the Electric Distribution System Franchise Agreement?

It is a contract between the Town of Morinville and the utility company (in this case Fortis Alberta) that outlines the requirements that need to be met in order to allow the utility company to use the public lands in the utility corridor(s) within the Town.

What is a Franchise Fee?

It is the rent that the utility company pays to the Town of Morinville to use the public lands.

Why is this necessary?

If the municipality didn’t provide the land via the EDSFA – the utility company would have to purchase land in each municipality to run their infrastructure through the town. The cost to the company would be huge, in both land costs, property taxes and maintenance.

How does this impact me?

The Utility company chooses to incorporate these fees into the monthly billing for their customers. If you take a look at your utility bill, there will be a line for Property or Franchise Fee. This is why Council looks at the Franchise Fee amount each year – any change we make to the fee directly impacts the utility customers in our community.

This year the recommendation is to have the Franchise Fee remain the same as it was last year. But because of an increase in transmission and distribution fees, there will be a small increase to the utility bills each month. The municipality has to bring in revenue to cover the costs in the budget, so if the Franchise Fee rate is decreased, the money that will be lost in revenue from this item has to be made up somewhere else or services have to be cut in that amount. One thing to remember is that when it comes to Franchise Fees, they are collected from all utility customers. That includes customers who are exempt from paying property taxes ie: schools, churches, government buildings, etc. If we did decreased the Franchise Fees and increased the property taxes, residential homeowners would be out of pocket more money each month than they would if we left the Franchise Fee rate the same as last year. Instead of an increase of $5/month on average we would be looking at an increase of approx. $8 /month average.

 

Check back after the October 8th meeting to find out what Council decided will be the Franchise Fee rate for 2013. And if you have any other questions about this item, email me or comment below!

 

 

One Response

  1. Peter

    I work for an energy consultancy firm for one of customers that had the Municipal Franchise Fee charged on the billing. I found your explanation very helpful and easy to understand what the charge was for. Nice work

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