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ATCO Gas and Pipelines Ltd. Franchise Agreement with the Village of Czar, AUC Decision 25499-D01-2020

Link to Decision Summarized

Natural Gas – Franchise Agreement


In this decision, the AUC considered an application from ATCO Gas and Pipelines Ltd. (“ATCO”) requesting approval of a natural gas franchise agreement (the “Franchise Agreement”) with the Village of Czar (“Czar”). The AUC approved the proposed Franchise Agreement as filed.

Proposed Franchise Agreement and Franchise Rate Rider Schedule

Under the proposed Franchise Agreement, Czar would grant ATCO the exclusive right within the municipal service area to provide natural gas distribution service. The proposed Franchise Agreement would have a term of ten years. ATCO proposed a franchise fee of 11.84 percent, which was a continuation of the franchise fee from the previous franchise agreement between Czar and ATCO. The proposed franchise fee was less than the 35 percent franchise fee cap previously approved by the AUC.

The franchise fee was to be a payment in lieu of municipal property taxes pursuant to section 360 of the Municipal Government Act (“MGA”). The proposed Franchise Agreement included changes to the standard natural gas franchise agreement template, approved by the AUC in Decision 20069-D01-2015 to reflect this.

AUC Findings

Section 45 of the MGA deals with franchise agreements and provides that a municipal council may grant a right to a person to provide utility service in the municipality. Section 45(3) of the MGA provides that before such an agreement is made, it must be approved by the AUC. Similarly, section 49(1) of the Gas Utilities Act provides that no franchise granted to any owner of a gas utility by any municipality within Alberta is valid until approved by the AUC.

The AUC noted that, in considering whether to approve the Franchise Agreement, the AUC must determine whether the proposed agreement is necessary and proper for the public convenience, and properly conserves the public interests, as set out in section 49(2) of the Gas Utilities Act (“GUA”).

The AUC stated that, in considering the franchise fee, its role is not to substitute its view on an appropriate franchise fee for that of the municipality, but to determine whether or not the level of the fee would result in an unreasonable burden on customers’ utility bills. The AUC noted that, in this case, the proposed franchise fee of 11.84 percent was below the 35 percent fee cap previously approved by the AUC. Also, the franchise fee percentage was a continuation of the franchise fee from the previously approved franchise agreement between these parties. As a result, the AUC found the proposed franchise fee to be reasonable.

The AUC also noted the term of the proposed agreement was within the 20-year maximum specified by the MGA. As such, the term of the Franchise Agreement was acceptable to the AUC.

The AUC considered the proposed changes to the standard gas Franchise Agreement template. The AUC noted that Czar had been paid franchise fees in lieu of taxes in previous franchise agreements. The AUC also noted Czar had this option pursuant to section 360 of the MGA.

The AUC considered that the right granted to ATCO by Czar set forth in the proposed Franchise Agreement was necessary and proper for the public convenience and properly conserved the public interests. Accordingly, pursuant to section 45 of the MGA and section 49 of the GUA, the AUC approved the proposed Franchise Agreement as filed.

In accordance with section 36 of the GUA, the AUC also approved ATCO’s Rate Rider A amount of 11.84 percent for customers in Czar, commencing on the date the proposed Franchise Agreement becomes effective.

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