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Facts about energy costs and Local Access Fees

Charges to your utility bill


Two main charges make up your energy bill:

  • The cost of energy consumed, and
  • The cost of delivering this energy from its source to consumption point.

The energy charges are based on how much of the actual commodity you used, whereas the cost of delivering the energy is largely fixed.

Delivery charges cover the cost of installing, operating, and maintaining the infrastructure that's used to transmit energy to your home, along with related ancillary costs such as customer care and meter reading. For electricity, this infrastructure includes poles, wires and transformers, and for natural gas, infrastructure includes pipes and compressor stations.

Delivery company rates are regulated by the Alberta Utilities Commission (AUC), an independent, quasi-judicial agency associated with Alberta Energy. The AUC holds rate hearings to ensure that you receive safe and reliable services at a reasonable cost.

Municipal, provincial, and federal governments have a framework that ensures most of the payments made for utility services go to utility providers. The majority of the typical Alberta electricity and natural gas bill goes towards the recovery of delivery charges incurred by utility companies.

Distribution of Utility Bill Payment by Beneficiary

Distribution of Utility Bill Payment by Beneficiary pie chart

In Alberta, customers have a choice of energy retail service providers and can choose between a fixed, variable or regulated rate option (RRO).

The energy charge on your bill is determined by the open and competitive wholesale energy-only electricity market. Utility customers in Alberta have a choice of retail service providers and can evaluate their choice of providers through the Utilities Consumer Advocate website.

For regulated rate option (RRO) customers, the energy charge (or commodity charge) on your bill is determined monthly according to the energy price-setting plan approved by the AUC. These monthly rates are intended to reflect the actual wholesale electricity prices for the month and will fluctuate between months based on supply and demand in the electricity marketplace.

The charge on your utility bill is based on your consumption for the billing period, which is calculated per kilowatt-hour (kWh). This charge does not include any costs or services related to delivery of the energy to your home or business.​

In the 2023 July 19 Mandate letter to the Minister of Affordability and Utilities, Alberta premier Danielle Smith directed, among other initiatives, that the potential phase out of the RRO for electricity be explored. Any decisions concerning the RRO has the potential to impact Calgary and how local access fees are assessed.

Examining Local Access Fees


Calgary’s affordability is top of mind for citizens, local businesses, and The City.
The City is aware of the financial strain many are experiencing. The surge in Alberta electricity prices since 2021 is unprecedented resulting in rising utility costs, a skyrocketing Regulated Rate Option for electricity, and making it increasingly
difficult to make ends meet. This has also resulted in higher than budgeted Local Access Fee (LAF) revenue for The City. The magnitude of these increases creates the need for a comprehensive review of The City's Local Access Fee methodology. In March 2024, Council directed Administration to design and implement a revised methodology for Local Access Fees that aligns with a "quantity only" model.

This timeline highlights recent developments in Council’s examination of The City's current Local Access Fee structure to make life more affordable for Calgarians.

What are Local Access Fees?


The Municipal Government Act allows municipalities to charge utilities a fee in lieu of property taxes and municipal right-of-way access fees. In this way, Local Access Fees are a mechanism to ensure public utilities pay their fair share, since they do not pay property tax.

Local Access Fees cover the direct costs of allowing utilities, such as natural gas and electricity, to build their infrastructure on municipal lands, restrictions on planning and development, and inherent risks related to utility access.

Electricity

There are two components of the Local Access Fee (LAF) calculation for electricity:

  • Distribution cost
  • Amount of electricity consumed

The distribution cost is approved by the Alberta Utilities Commission.  The City uses the monthly regulated rate option (RRO) (also approved by the Alberta Utilities Commission) on the individual customer usage in calculating the local access fee for all customers (RRO customers and those on a contract). This means that the percentage of your bill attributed to the LAF may vary depending on what price you pay for electricity.   

RRO (no electrical contract) Contract

Cost of distribution* (approx. 50%  of bill)

+

Consumed electricity* (approx. 25% of bill)

The City charges 11.11% of the monthly RRO to calculate the LAF. 

  • If the electricity price in your contract is is less than than the RRO in a billing month, then the LAF will make up a higher portion of your bill and will be more than 11.11% for the month in question.
  • If the electricity price agreed to in your contract is the same as the RRO in a billing month, then the LAF will be equal to 11.11% for the month in question.
  • If the electricity price in your contract is higher than the RRO in a billing month, then the LAF will make up less than 11.11% of your bill for the month in question.    

* rates are approved monthly by the Alberta Utilities Commission

Calgary’s local access fee per person is comparable with these municipalities – view our recent survey. At least 217 Alberta municipalities have electricity local access fees.

Gas

There are two components of the Local Access Fee (LAF) calculation for gas:

  • Distribution cost
  • Amount of Gas flow-through

The Gas Cost Flow-through Rate (GCFR) is applied to the customer usage component of the bill.  The GCFR is approved by the Alberta Utilities Commission. The natural gas franchise fees for all consumers are based on the GCFR and collected by ATCO Gas. 

GCFR (no gas contract) Contract

Cost of distribution* (approx. 50% of bill)

+

Consumed gas flow-through* (approx. 25% of bill)

The City charges the monthly GCFR, at 11.11% on the consumer's usage to calculate the LAF. 

  • If the price in your natural gas contract is less than the GCFR in a billing month, then the LAF will make up a higher portion of your bill and will be more than 11.11% for the month in question.
  • If the price agreed to in your natural gas contract is the same as the GCFR in a billing month, then the LAF will be equal to 11.11% for the month in question.
  • If the price in your natural gas contract is higher than the GCFR in a billing month, then the LAF will make up less than 11.11% of your bill for the month in question.     

* rates are approved monthly by the Alberta Utilities Commission

Calgary’s local access fee per person is comparable with these municipalities – view our recent survey. At least 217 Alberta municipalities have natural gas local access fees.

Providing emergency financial support to Calgarians experiencing vulnerabilities

A proposal for an affordability program is set to be presented to the Council in November, which aims to provide non-profit funding using surplus funds from Local Access Fees. The objective is to deliver programs to Calgarians who are in the greatest need of assistance. The investments will help to keep families housed, ensure individuals have access to heating and electricity, and allow people to escape violence. 

Additional support

Fair entry
Programs and services for low-income Calgarians. Apply for multiple programs and services with one application, your eligibility is based on your income. 

211 Alberta
For additional provincial information on community, social and health services support, visit ab.211.ca or call 211.

Using Local Access Fees to support Calgarians

The revenue generated from the LAF is a vital resource for our city. Budgeted revenue from local access fees is used to support the operating budget and contribute to keeping property taxes low. Any positive variance is directed to the Reserve for Future Capital, where it is invested into new facilities and other amenities or used for maintenance of existing ones. These initiatives are carefully designed to benefit Calgarians directly.

The Reserve for Future Capital played a crucial role in supporting a range of projects that had a positive impact on our community in 2022 including:

Forest Lawn Civic Centre

The first phase of the multi-service facility that, once complete, will improve fire response times, library and recreation access, transit and arts and culture provision in the area.

Parks infrastructure lifecycle

Replacement and upgrades of park equipment to ensure their continued accessibility and functionality.

Recreation lifecycle

Maintenance and upgrades of The City’s Recreation facilities to meet Calgarians and operational needs.

Public realm investments

With input from our partners, investments were made to attract business, creating complete communities and supporting growth.

Mobility

Enhancing accessibility for pedestrians and facilities across our city, a testament to our dedication to inclusivity.

Public safety

City investments to address slope stabilization, ensuring we can assess and determine the most appropriate course of action to ensure public safety.

New “Quantity Only” Local Access Fee Methodology


On 2024 March 18, City Council directed Administration to design and implement a revised methodology that aligns with a “quantity only” model. A quantity only model for the collection of Local Access Fees is expected to set a price per volume of energy consumed. This price is expected to be set by Council annually. The quantity only model will result in more stable and predictable Local Access Fee revenue (when compared to the “total bill” model) and will be more supportive of affordability concerns expressed by Calgarians and local businesses.

Pending all necessary approvals, the quantity only model for Local Access Fees is expected to be in place on 2027 January 1. The initial price per volume of energy consumed for the purpose of the collection of Local Access Fees is expected to be confirmed and set by Council sometime in 2026.

FAQs


How does Calgary’s Local Access Fees for natural gas and electricity compare to those charged by the City of Edmonton?

The franchise fees per person from 2013 to 2022 show that Calgary’s fees for electricity have been higher than Edmonton, but Edmonton’s fees for natural gas have been consistently higher than Calgary over the same period. 

How do Alberta’s residential electricity costs compare to other major cities across Canada?

Hydro-Québec has previously conducted an annual survey of electricity prices for electricity customers across major cities in North America. The two most recent versions are for April 2021 and April 2022.

The survey confirms residential customers in Calgary and Edmonton pay above-average electricity prices relative to residential customers in other major Canadian cities. A key driver of the price differential is the source of electricity. Cities that rely on hydropower have lower prices. Cities that depend on natural gas-fired generating plants also contend with carbon taxes embedded in commodity costs. In addition, cities like Calgary and Edmonton that rely on natural gas-fired generating plants experienced substantial price increases for the underlying commodity between December 2020 and 2022, as reflected in the higher rate of change.

Average electricity prices in major Canadian cities - residential (c/kWh, excluding taxes)

City 2021 2022 Rate of change Sources of electricity
Montréal, QC 7.39 7.59 3% Hydropower generating stations and wind power purchases (>99% of power supplied is clean and renewable)
Vancouver, BC 11.58 10.24 (12%) Hydropower generating stations (about 98%)
Winnipeg, MB 9.87 10.80 9% Hydropower (about 96%), thermal and diesel
Ottawa, ON 12.45 12.94 4% Purchases from Ontario Power Generation
St. John's, NL 13.60 13.76 1% Hydropower (80%) and fuel-fired (20%) generating stations
Moncton, NB 13.66 13.94 2% Thermal (1,716 MW), hydropower (889 MW), nuclear (660 MW) and combustion turbines (525 MW)
Toronto, ON 13.43 13.88 3% Purchases from Ontario Power Generation
Regina, SK 16.51 16.51 0% Natural gas (43%), coal (31%), hydropower (20%), wind (5%), solar and other (1%)
Halifax, NS 17.09 17.30 1% Coal, petroleum coke, wind, hydropower and other
Charlottetown, PE 17.38 17.78 2% Purchases from NB Power and PEI Energy Corporation
Edmonton, AB 16.99 19.48 15% Market purchases
Calgary, AB 17.26 19.94 16% Natural gas (91%) and wind (9%)

What has The City done to support affordable electricity prices in Calgary?

The City is aware that electricity distribution charges have increased over the past few years. City analysis indicates that electricity ratepayers in Calgary (through ENMAX) currently pay the lowest monthly distribution costs in Alberta . It provides some assurance of better value for equal service.

The City of Calgary is also involved in utility rate setting proceedings at the AUC. The delivery charge for natural gas and electricity is regulated and approved by the AUC, following evidentiary submissions from utilities and consumer interest groups, which can include municipalities. The City of Calgary regularly exercises its rights as a rate-paying intervener in AUC proceedings to scrutinize natural gas delivery charges, advocate for rates that reflect economic realities, and help minimize rate increases for The City and Calgarians.

Average monthly distribution cost of electricity for residential line graph

How does the regulated rate (RRO) compare to the market price of electricity?

In early August 2023, the 30 day rolling average wholesale power price was 15 cents for a month while the August 2023 RRO is 32 cents per kWh, which means that the utilities acquired expensive power in the forward strips when it was very expensive and that this August 2023 RRO price was approved by the AUC in the procurement plans.

Residential ROO Rate (cents per kWH) line graph

How do Calgary’s local access charges compare to other municipalities in Alberta?

Most Alberta municipalities charge these fees. In January 2023, The City of Calgary completed a survey of the 15 largest municipalities in Alberta that represent more than 70 per cent of the population. They ‘all’ confirmed charging these fees for natural gas and electricity. The results of the survey showed that Calgary’s local access fee per person is comparable with these municipalities. At least 217 Alberta municipalities have electricity local access fees.

Where can I get more information about the increase in underlying commodity prices?

The distribution charges on natural gas and electricity are determined and approved by the Alberta Utilities Commission (AUC). Questions regarding the level of or increases to distribution charges can be directed to the AUC at 403-310-4282 or info@auc.ab.ca.

What other resources are available to Calgarians interested in education or mediation?

Distribution charges have been increasing steadily in recent years. The UCA has a mandate to educate and mediate for Alberta’s small business, farm, and residential electricity, natural gas and water consumers and advocate for energy consumers. You can contact them at 403-310-4822 or UCAhelps@gov.ab.ca.

Related links


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