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24812-D01-2019 Decision 24812-D01-2019 ATCO Gas and Pipelines Ltd. Franchise Agreement with the Town of Magrath September 6, 2019 Alberta Utilities Commission Decision 24812-D01-2019 ATCO Gas and Pipelines Ltd. Franchise Agreement with the Town of Magrath Proceeding 24812 September 6, 2019 Published by the: Alberta Utilities Commission Eau Claire Tower 1400, 600 Third Avenue S.W. Calgary, Alberta T2P 0G5 Telephone: 310-4AUC (310-4282 in Alberta) 1-833-511-4AUC (1-833-511-4282 outside Alberta) Email: [email protected] Website: www.auc.ab.ca The Commission may, within 30 days of the date of this decision and without notice, correct typographical, spelling and calculation errors and other similar types of errors and post the corrected decision on its website. Contents 1 Introduction .......................................................................................................................... 1 2 Proposed franchise agreement and franchise fee rate rider schedule ............................ 1 3 Commission findings............................................................................................................ 3 Appendix 1 – Proceeding participants ........................................................................................ 5 Appendix 2 – Franchise agreement between ATCO Gas and Pipelines Ltd. and the Town of Magrath ................................................................................................................. 6 Appendix 3 – Rider A with respect to the Town of Magrath.................................................... 7 Decision 24812-D01-2019 (September 6, 2019) i Alberta Utilities Commission Calgary, Alberta ATCO Gas and Pipelines Ltd. Decision 24812-D01-2019 Franchise Agreement with the Town of Magrath Proceeding 24812 1 Introduction 1. On August 13, 2019, ATCO Gas and Pipelines Ltd. (ATCO) filed an application with the Alberta Utilities Commission requesting approval of a natural gas franchise agreement renewal with the Town of Magrath (Magrath). The application was made pursuant to Section 45 of the Municipal Government Act and Section 49 of the Gas Utilities Act, and in accordance with the requirements of Rule 029.1 In addition, pursuant to Section 35 of the Gas Utilities Act, ATCO sought approval of a franchise fee rate rider schedule, which reflects the franchise fee percentage set out in the franchise agreement. 2. ATCO indicated that notice of the proposed franchise agreement was advertised on July 18, 2019, in the Westwind Weekly newspaper and that no objections or concerns were received.2 Given the absence of objections or concerns, the Commission has processed this application without further notice. 3. In reaching the determinations contained within this decision, the Commission has considered all relevant materials comprising the record of this proceeding. Accordingly, references in this decision to specific parts of the record are intended to assist the reader in understanding the Commission’s reasoning relating to a particular matter and should not be taken as an indication that the Commission did not consider all relevant portions of the record with respect to that matter. 2 Proposed franchise agreement and franchise fee rate rider schedule 4. Under the proposed franchise agreement, Magrath grants ATCO the exclusive right within the municipal service area to provide natural gas distribution service, construct, operate and maintain the natural gas distribution system and use portions of roads, rights-of-way, and other lands owned, controlled or managed by Magrath that have been designated by Magrath for such use and which are necessary to provide natural gas distribution service or to construct, operate and maintain the natural gas distribution system.3 5. The proposed franchise agreement, attached as Appendix 2 to this decision, has a term of 10 years effective the later of October 1, 2019, and the first business day after both of the following have occurred: (i) the Commission has approved and acknowledged the agreement; and (ii) Magrath’s bylaw adopting the agreement (Bylaw No. 1249) has received third reading. 6. The proposed franchise fee of 15.00 per cent, as shown in Rate Rider A, attached as Appendix 3, is a continuation of the franchise fee from the previous franchise agreement 1 Rule 029: Applications for Municipal Franchise Agreements and Associated Franchise Fee Rate Riders. 2 Exhibit 24812-X0002, Natural Gas Franchise Application form. 3 Exhibit 24812-X0003.01, page 8. Decision 24812-D01-2019 (September 6, 2019) 1 Franchise Agreement with the Town of Magrath ATCO Gas and Pipelines Ltd. between Magrath and ATCO.4 ATCO advises this will result in a continuation of an average monthly franchise fee of $6.28 for an average residential customer.5 The proposed franchise fee is less than the 35 per cent franchise fee cap previously approved by the Commission.6 Under the agreement, Magrath has the option to change the franchise fee percentage annually upon written notice to ATCO and Commission approval. The franchise fee is to be a payment in lieu of municipal property taxes pursuant to Section 360 of the Municipal Government Act. 7. The proposed franchise agreement includes changes to the standard natural gas franchise agreement template, which was approved by the AUC in Decision 20069-D01-2015.7 These changes are detailed below. 8. The following underlined language was added to Clause 5(a) –Franchise Fee: 5) Franchise Fee a) Calculation of Franchise Fee In consideration of the rights granted pursuant to paragraph 4 and the mutual covenants herein and subject to Commission approval the Company agrees to collect from Consumers and pay to the Municipality a franchise fee. The Parties agree that the Company shall pay a franchise fee in lieu of taxes on the special franchise, lands, buildings, improvements, pipelines, works, machinery, equipment and apparatus belonging to and used by the Company in the exercise of the franchise and related operations in the Municipal Area pursuant to Section 360 of the Municipal Government Act [MGA] RSA 2000 c M-26, as amended. Further the Parties agree s. 360(4) of the MGA, as amended, does not apply to the calculation of the franchise fee in this Agreement. For each calendar year the franchise fee will be calculated as a percentage of the Company’s actual total revenue derived from the Delivery Tariff, including without limitation the fixed charge, base energy charge, demand charge, but excluding the cost of Natural Gas (being the calculated revenues from the Natural Gas cost recovery rate rider or the deemed cost of Natural Gas and Natural Gas supply related riders) in that year for Natural Gas Distribution Service within the Municipal Service Area. …8 9. Clause 8 – Municipal Taxes within the standard franchise agreement template was removed from the proposed franchise agreement. Clause 8 stated: 8) Municipal Taxes Amounts payable to the Municipality pursuant to this Agreement will be (without duplication) in addition to the municipal taxes and other levies or charges made by the 4 Decision 2009-236: Town of Magrath Franchise Agreement with ATCO Gas and Pipelines Ltd., Application 1605261-1, November 27, 2009. 5 Exhibit 24812-X0002. 6 Decision 20069-D01-2015, paragraphs 31-32. 7 Decision 20069-D01-2015: AltaGas Utilities Inc. et al., Approval of New Standard Natural Gas Distribution System Franchise Agreement Template, Proceeding 20069, March 20, 2015. 8 Exhibit 24812-X0003.01, page 10. Decision 24812-D01-2019 (September 6, 2019) 2 Franchise Agreement with the Town of Magrath ATCO Gas and Pipelines Ltd. Municipality against the Company, its land and buildings, linear property, machinery and equipment.9 3 Commission findings 10. Section 45 of the Municipal Government Act 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. It also provides that the agreement may grant a right to use the municipality’s property for the construction, operation and extension of a public utility in the municipality. Neither of these grants can exceed 20 years. Section 45(3) provides that before such an agreement is made, amended or renewed, it must (a) be advertised, and (b) be approved by the Alberta Utilities Commission. 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 Commission. 11. In considering whether to approve the franchise agreement, the Commission 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. In making this determination, the Commission’s review is focused primarily on provisions which may cause concern with respect to the public interest or to ensuring rates are just and reasonable.10 Franchise agreements are reviewed from a more general perspective than a utility’s costs and rates, as a municipality’s council is accountable to its ratepayers for the franchise fees that it implements. 12. In considering the franchise fee, the Commission’s role is not to substitute its view on an appropriate franchise fee for that of the municipality, but only to determine whether or not the level of the fee would result in an unreasonable burden on customers’ utility bills.11 In this case, the proposed franchise
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