| Are Calgary Enmax residential electricity customers being gouged?
Last year the City of Calgary charged its electrical utility, Enmax, $68 million for use of city property to provide power to consumers. Now, as Enmax is a wholly-owned subsidiary of the City of Calgary, which is preparing to have rates set by the Alberta Energy and Utilities Board(EUB), ratepayer groups are asking why the city is charging its own public utility for using public lands and why the fees are unanswerably high.
According to an Edmonton utilities watchdog, the City of Calgary has a "cozy" arrangement with Enmax for levying a monthly charge called local access fees. These fees show up on utility bills every month and remove money from consumers by giving it indirectly to city hall.
"It's a cozy little deal between the city and the utility. It's basically a type of taxation," says Jim Wachowich, Consumers' Association of Canada's Alberta spokesperson. "From a consumer perspective it adds a cost to an essential, non-discretionary purchase."
According to Enmax, the city received $68.2 million from local access fees in 2003, $72.2 million in 2002 and $110 million in 2001. On top of this, consumers paid seven per cent federal GST, which, for the three years noted, cost consumers another $17.5 million.
Previously called the municipal consent and access fee (MCAF), the local access fee is calculated on a multiplier basis (11.11 per cent of distribution and energy revenue), rather than being set at a given amount.
"It's a fee that we pay to the city for us to use city rights-of-way and lands. The fee is set by city hall," says Tony McCallum, Enmax communications manager. Neither the City nor Enmax would provide a copy of this agreement.
While Enmax pays the monthly amount to the City, this "fee" is passed directly onto consumers, making it very much like a tax. Calgary’s fee is also much higher than other Alberta municipalities.
The city's local access fee 2004, for example, is expected to be more than seven times higher than that paid by the people of Granum, a small town 95 kilometres south of Calgary, that buys its power from privately-owned Aquila Networks Canada (Alberta) Ltd.
Granum’s 390 residents will pay 85 cents on their monthly utility bills for a proposed franchise fee agreement, pending EUB approval, while Enmax will charge Calgarians a local access fee of $5.93 per month for the same amount of electricity.
Neither city aldermen Dale Hodges nor Bob Hawkesworth, who both sit on the board of directors of Enmax, returned phone calls to explain how the City and Enmax agreed to these rates.
Calgary's high franchise fees have caught the attention of national groups in the past. The Canadian Federation of Independent Business conducted a 2003 study entitled, "Municipal Franchise Fees: Are local governments taking more than their share?"
Economist Brett Gartner, who authored the study, says that Calgary charges more than three times what Edmonton invoices its citizens. He says the fees collected in Calgary were based on a fluctuating rate that increased with higher electricity rates, rather than being a fixed rate dependent upon kilowatts used.
"Our first recommendation was for municipalities to lower the fees, change the methodology by which it is calculated, based on amount used, not cost," says Gartner.
Wachowich confirms Gartner's numbers. An Edmonton Epcor customer in January paid MCAF of $4.30 for 1,100 kilowatt hours of electricity. In Calgary, a residential customer would have paid equivalent local access fees of approximately $14.
The Enmax access fee paid to the city is separate from the dividend paid to the city by the electrical utility. Each year, Enmax collects a surplus over and above its break-even point – which is essentially a profit – that is funnelled back into the city's general revenues. According to Enmax ‘s recently released consolidated financial report, the publicly-owned utility paid the city $50 million in dividends in 2003.
Under new provincial rules, the EUB, for the first time, will hear submissions on Enmax ‘s applications to set regulated and distribution rates for the next decade. While Enmax has budgeted $1.75 million for regulatory hearings in 2004, there is still some uncertainty as to whether the local access fee agreement will be reviewed.
"When the Board looks at Enmax’s distribution tariff in March, the issue of the local access fee will be raised," says Brenda Poole-Bellows, EUB spokesperson. "When it is reviewed by the Board, they will be looking at the new legislation that guides us to ascertain if this issue lies within our jurisdiction." |
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