Calgary's extra fee on top of electricity prices expected to top $200M in revenue — again

The City of Calgary is expecting more than $200 million in revenue this year from the "local access fee" on Calgarians' power bills, blowing past what it had initially budgeted and far exceeding the amounts collected in previous years.

The surplus of cash flowing into city coffers comes as many Calgarians are facing higher power bills, and there are growing calls for city council to change the way it calculates the fee to reduce the burden on residents and businesses.

The Calgary Chamber of Commerce has issued an open letter asking council to review the local access fee formula, which, unlike in other municipalities, sees the fee rise and fall with the price of power itself.

"While both residents and businesses are affected, the impact on business is compounded," Chamber president Deborah Yedlin wrote.

Last year, Yedlin said businesses accounted for more than 63 per cent of local access fees collected in Calgary.

The increase in fees has also been affecting residential customers, says Blake Shaffer, a University of Calgary economist who specializes in electricity markets.

He says Calgarians have been paying several times as much as people in Edmonton in local access fees lately, due to the high price of power.

Edmonton, unlike Calgary, uses a fixed-rate formula to calculate its local access fees, so the amount it collects is not subject to the same swings.

"I don't understand why the City of Calgary does it this way," Shaffer said. "I've been trying to raise the alarms on this for several years now."

Shaffer says the issue has been getting more attention lately due to the high price of electricity and the size of the windfall the local access fees have been generating for the City of Calgary.

Calgary collected nearly $226 million in local access fees on electricity last year, up 76 per cent from the average over the previous decade.

This year, it had initially budgeted for $117 million in revenue from the fees but now expects the actual total could reach $210 million by year's end.

The surplus of cash was the subject of discussion when city councillors met last week and the formula itself is on the agenda for Tuesday's regular council meeting, when city staff are set to provide a report on the "impact of local access fees on affordability."

City staff are recommending that council approve further study of "what a potential change to local access fees could look like" and "what the budget implications to the City of Calgary would be."

Staff are recommending council revisit the issue in early 2024.

How the fee was set

Oyin Shyllon, an economist with the City of Calgary, told CBC News the city has been using the same method for calculating the local access fee since the late 1990s.

"When prices go low, we receive less and when prices go high, we receive more," he explained.

The local access fee is set in agreement with several other parties.

Enmax Power, Calgary's electricity distributor, collects the fee and pays the money to the City of Calgary in lieu of property taxes.

The fee is mutually agreed upon between the City of Calgary and Enmax Power (which is a subsidiary of Enmax, a city-owned private corporation).

The fee agreement must also be approved by the Alberta Utilities Commission.

Given all this, Mayor Jyoti Gondek said changing the fee formula can't happen overnight. 

"If council determines that this is not the formula that we wish to use into the future, it will be something that we have to do over time," she said. "It can't be enacted immediately."

'Natural hedge' for the city

Coun. Andre Chabot has defended the city's approach to calculating the local access fee, saying it acts as a "natural hedge" for the city's own electricity costs.

"It adjusts our revenue to compensate us for additional costs or additional savings, depending on what we have to negotiate new contracts for," he said this summer on The Calgary Eyeopener.

Gondek agreed that historically the fee formula has protected the City of Calgary, as a corporation, from higher electricity prices.

"The problem is: it is not protecting Calgarians," she said.

"And so we have a dual role to play: we have to serve the best interests of the corporation but the corporation serves the best interest of Calgarians."

Given the amount of surplus revenue the fee has generated for the city, Shaffer says council should not only consider changing the formula in the future but rebating some of the money that has already been collected.

"The city has choices available to them," he said.

"They could return money to households. In fact, the City of Medicine Hat similarly came into a windfall on power prices for a different reason — they have a power plant in the city — and they've just chosen ... to send cheques back to households."

While Calgarians with good credit can choose to lock in a fixed rate for their own power prices, Shaffer noted the local access fee is calculated based on the floating market rate, so there is no similar way to avoid to the recent swings.