Water Franchise Agreement
In this decision, the AUC considered an application made pursuant to section 45 of the Municipal Government Act by Rocky View County (“Rocky View”) for approval of a water franchise agreement (“Agreement”) with Calalta Waterworks Ltd. (“Calalta”) for a term of 20 years.
The AUC stated that franchise agreements must be approved by the AUC under section 45 of the Municipal Government Act:
Granting rights to provide utility service
45(1) A council may, by agreement, grant a right, exclusive or otherwise, to a person to provide a utility service in all or part of the municipality, for not more than 20 years.
(2) The agreement may grant a right, exclusive or otherwise, to use the municipality’s property, including property under the direction, control and management of the municipality, for the construction, operation and extension of a public utility in the municipality for not more than 20 years.
(3) Before the agreement is made, amended or renewed, the agreement, amendment or renewal must
(a) be advertised, and
(b) be approved by the Alberta Utilities Commission.
(4) Subsection (3)(b) does not apply to an agreement to provide a utility service between a council and a regional services commission.
(5) Subsection (3) does not apply to an agreement to provide a utility service between a council and a subsidiary of the municipality within the meaning of section 1(3) of the Electric Utilities Act.
Section 106 of the Public Utilities Act requires a public utility to obtain approval from the AUC before its franchise agreement is valid:
106(1) No privilege or franchise granted to an owner of a public utility by a municipality within Alberta is valid until approved by the Commission.
(2) Approval may be given when, after hearing the parties interested, or with the consent of the parties, the Commission determines that the privilege or franchise is necessary and proper for the public convenience and properly conserves the public interests.
(3) The Commission may, in so approving, impose any conditions as to construction, equipment, maintenance, service or operation that the public convenience and interests reasonably require.
Based on this legislation, the AUC indicated that to approve the Agreement it must consider the following issues:
(a) has the proposed franchise agreement been duly advertised?
(b) is the franchise agreement for not more than 20 years?
(c) is the franchise necessary and proper for the public convenience?
(d) does the franchise properly conserve the public interest?
Rocky View advertised the proposed Agreement in the online publication of the Rocky View Weekly Newspaper and Rocky View’s website on May 7, 2020. Additionally, the AUC issued notice of the application on the AUC’s website on June 10, 2020. The AUC found that the advertising completed by Rocky View and the AUC was sufficient to meet the test of the franchise agreement being duly advertised.
The AUC found that the term of the Agreement was for a maximum of 20 years and, accordingly, fell within the specified time frame.
Under the Agreement, the obligation to service the lands contained within the franchise area lies with Calalta, who is the owner of the system or works to be constructed throughout the franchise area. Failure to comply with or perform the terms of the Agreement may result in default and termination of the franchise agreement, and/or the performance of obligations in default by Rocky View, which are to be funded by the security under the franchise agreement. The AUC considered that these safeguards included in the Agreement would protect customers and conserve the public interest.
Rocky View has given first reading to Bylaw No C-8015-2020, which prohibits any person other than Calalta from providing all or any portion of the water services within the franchise area. The AUC considered this enactment would facilitate the orderly development of the franchise area, provide quality servicing, and rate certainty to customers. The AUC found this was proper for the public convenience and would conserve the public interest. Further, the Agreement would establish sufficient operational and maintenance requirements that would govern Calalta. These safeguards would also protect customers and conserve the public interest.
The proposed Agreement specified an initial franchise fee equivalent to zero percent of gross utility accounts collected by Calalta, with a maximum franchise fee of 10 percent. During the term of the franchise agreement, the level of the franchise fee may be changed once annually by Rocky View following consultation with Calalta. The AUC considered the initial franchise fee, which is set at $0.00, was reasonable given that it would not result in any additional costs to customers. Further, capping the franchise fee at 10 percent should not create an onerous burden on customers.
The AUC was of the view that the right granted to Calalta by Rocky View in the franchise agreement was necessary and proper for the public convenience and properly conserved the public interest. Accordingly, pursuant to section 45 of the Municipal Government Act and section 106 of the Public Utilities Act, the AUC approved the proposed Agreement as filed.