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Town council discuss expiring franchise agreement

Posted on May 16, 2019 by Vauxhall Advance

By Cole Parkinson
Vauxhall Advance

Come this November, the current franchise agreement between the Town of Vauxhall and ATCO Gas expires.

With a few months before it does, an ATCO Gas delegation was in council chambers to lay out what a potential new deal would look like and the few changes that come with it.

“The franchise agreement gives us, as a utility, the right to provide natural gas in the community and gives us the sole right to provide natural gas. It gives us certainty in investments as we upgrade and connect customers,” explained Shane Ellis, ATCO Lethbridge manager.

ATCO has been serving the town of Vauxhall since 1958 and is operated out of the ATCO Taber office, which has three employees and provides service to 505 residents residing in and around Vauxhall.

“The current franchise agreement expires in November 2019. If we are not renewed by then, the current agreement carries on until we are able to negotiate. There is a provision in the agreement that if one year has passed since expiry, we are able to pull back part of the franchise fee. We have never actually done that but it is in the agreement. We work in good faith without communities,” continued Ellis.

The current agreement between the two is based on a 2003 template which was developed with the Alberta Urban Municipalities Association (AUMA) while the new template would be used for the new deal.

The newest template for the ATCO franchise agreement was negotiated with AUMA and approved in 2015.

“One of the changes is in term, so it used to automatically 10 years but now it is 10 to 20 years. There are three things that communities will need to decide by yourself. The first is term,” explained Ellis.

The next decision needing to be made by council was around the ATCO franchise fees.

“You are unique, there are only three other communities similar to you in southern Alberta right now that are collecting a method C franchise fee. Method C includes the commodity cost of gas in your calculation for what your franchise fee would look at. If you look historically, it has gone up and down with the cost of gas. In 2014, you collected $36,000 in revenue, the next year it dropped to $25,000, it then dropped to $23,000 and it bounced back because gas is a commodity that goes up and down,” added Ellis.
The current fee in Vauxhall is 5.5 per cent of ATCO’s revenue, while neighbouring municipalities who use Method A such as Taber, has 20 per cent (35 per cent for high usage), Barnwell is 13 per cent, and Coaldale which is also 13 per cent.

The other three municipalities who use Method C are Calgary at 11.11 per cent (exemption available on Rider “E” portion of natural gas feedstock quantities) and Glenwood at 5.26 per cent.

Method A fees are applied to gross revenues while Method C are applied to gross revenues as well as Rider “E” (A deemed value of natural gas rate will be applied to the energy delivered to delivery service customers for the determination of municipal franchise fee).

Ellis also stated Method A is ATCO’s recommended option for the franchise fee, though the municipality could continue with Method C for the new deal.

“The cap is up to 35 per cent and you have the ability once a year to make a change to franchise fees for whatever reason,” continued Ellis.

Municipal tax can also be collected from customers under Method A.

“The last thing you have to decide, this is new in the agreement, and I think it is copied from the electric franchise agreement. There is a definition in there of major work. So when we do upgrades within the community, we get approvals and provide plans but for major work, we commit to providing as-builts to the community so they don’t have to wait for the next year to see the updates on the plan. You have to define what major work is, we suggest $100,000 value. You probably don’t need paper every time we come and provide service,” stated Ellis.

New clauses include amendments to the agreement only by written agreement, waiver of defaults, breaches or no-compliance under the agreement is not effective unless in writing and signed by the party to be bound by the waiver, and confidentially that acknowledges that the municipality is governed by the provision of the Freedom of Information and Protection of Privacy Act.

With a few months before the expiry of the current franchise agreement, council voted unanimously to accept the delegation’s presentation for information.
Coun. Jake Wiebe was absent.

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