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ATCO Gas and Pipelines Ltd. Franchise Agreement with the Village of Beiseker, AUC Decision 24998-D01-2019

Link to Decision Summarized

Gas – Municipal Franchise Agreement

In this decision, the AUC considered an application (the “Application”) filed by ATCO Gas South (“ATCO”) requesting approval of a natural gas franchise agreement renewal (the “Agreement”) with the Village of Beiseker (“Beiseker”). The AUC approved the Application.

Proposed Franchise Agreement and Franchise Fee Rate Rider Schedule

Under the Agreement, Beiseker would grant ATCO the exclusive right within the municipal service area to provide natural gas distribution service. The Agreement would have a term of ten years.

The Agreement proposed a franchise fee of 16.00 percent. ATCO advised that this would result in a continuation of an average monthly franchise fee of $6.70 for an average residential customer. The proposed franchise fee would be less than the 35 percent franchise fee cap previously approved by the AUC. Under the Agreement, Beiseker would have the option to change the franchise fee percentage annually upon written notice to ATCO and subject to AUC approval. The franchise fee would be a payment in lieu of municipal property taxes pursuant to section 360 of the Municipal Government Act (“MGA”).

The Agreement included changes to the standard natural gas franchise agreement template, approved by the AUC in Decision 20069-D01-2015. The parties agreed that ATCO would collect from consumers and pay to Beiseker a franchise fee in lieu of taxes. The municipal taxes clause of the standard franchise agreement template was removed from the Agreement.

Legislative Framework

Section 45 of the MGA deals with franchise agreements and provides, among other things, that a municipal council may, by agreement, grant a right, exclusive or otherwise, to a person to provide utility service in all or part of the municipality. The grant cannot exceed 20 years. Section 45(3) provides that before such an agreement is made, amended or renewed, it must be approved by the AUC. Similarly, section 49(1) of the Gas Utilities Act (“GUA”) provides that no franchise granted to any owner of a gas utility by any municipality within Alberta is valid until approved by the AUC.

In considering whether to approve the franchise, the AUC must determine whether the proposed agreement is necessary and proper for the public convenience, and properly serves the public interests, as set out in section 49(2) of the GUA.

AUC Findings

The AUC noted that the proposed franchise fee of 16.00 percent was below the 35 percent fee cap previously approved by the AUC. Also, the franchise fee percentage of 16.00 percent had been approved in Disposition 24115-D01-2018. The AUC also noted the term of the Agreement was within the 20-year maximum specified by the MGA.

The AUC considered the proposed changes to the standard gas franchise agreement template and noted that Beiseker had been paid franchise fees in lieu of taxes in previous franchise agreements. The AUC also noted that Beiseker had this option pursuant to Section 360 of the MGA.

The AUC considered that the right granted to ATCO by Beiseker set forth in the Agreement was necessary and proper for the public convenience and would properly serve the public interests. Accordingly, the AUC approved the Agreement as filed. The AUC also approved ATCO’s Rate Rider A amount of 16.00 percent for customers in the Village of Beiseker, commencing on the date the proposed franchise agreement becomes effective.

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