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ATCO Gas and Pipelines Ltd. Franchise Agreement with Red Deer County for the Hamlet of Springbrook, AUC Decision 28058-D01-2023

Link to Decision Summarized

Municipal Franchise Agreement – Facilities

Application

ATCO Gas and Pipelines (“ATCO Gas”) applied for approval of a franchise agreement with the Red Deer Municipality (“the Municipality”) to provide natural gas utility services and associated functionalities in the Hamlet of Springbrook (“the Services”).

Decision

The AUC found that: (i) the franchise agreement meets the standards for public convenience and public interest; (ii) the franchise fee is below the allowable maximum of 35 percent; and (iii) the Municipality provided adequate public disclosure of the franchise fee. The AUC approved the franchise agreement and the franchise fee of 10.5 percent (the “Franchise Agreement”).

Applicable Legislation

Municipal Government Act, RSA 2000, c M-26.

Gas Utilities Act, RSA 2000, c G 5.

AUC Rule 029: Application for Municipal Franchise Agreements and Associated Franchise Fee Rate Riders.

Pertinent Issues

Municipal councils may, by franchise agreement, grant the right to a person to provide utility services in all or part of the municipality. The AUC previously approved a franchise agreement between ATCO Gas and the Municipality at a higher franchise fee. However, since the Municipality did not sign that franchise agreement, the previous agreement never became operative. The AUC, therefore, rescinded AUC Decision 27722-D01-2022.

Under the proposed Franchise Agreement, the Municipality would grant ATCO Gas the exclusive right to provide the Services. The proposed agreement will be operative for ten years commencing April 1, 2023, alternatively the first business day after the approval of the agreement by the AUC and the adoption of the agreement by Bylaw.

Two principles guide the AUC when considering a franchise agreement. First, the franchise agreement must not exceed 20 years under s 45(1) of the Municipal Government Act. Second, the proposed agreement should be “… necessary and proper for the public convenience and properly conserves the public interests,” as set out in s 49(2) of the Gas Utilities Act.

The Franchise Agreement departs from the standard natural gas franchise agreement template approved in AUC Decision 20069-D01-2015 in two ways. First, the definition of “Municipal Service Area” is altered. Secondly, as a Schedule “C”, a map of the boundaries of the Springbrook Hamlet was added. The AUC found that the two changes do not harm the public interest because they are minor and serve to specify the Municipal Service Area and that the term of the proposed agreement is reasonable.

The AUC accepted the franchise fee since the franchise fee is below the upper limit of 35 percent set in AUC Decision 20069-D01-2015. Moreover, the proposed franchise fee was advertised in the widest circulating newspaper in the municipal area, and no objections or concerns were received.

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