The convergence of an affordability crisis, skyrocketing energy prices, and Calgary’s Local Access Fee (LAF) have further put Calgarians in a difficult spot. Seeking to understand and want to know what Council has been doing in response? Read on...
Dec 2023 UPDATE:
Council deferred a decision on the Local Access Fee (LAF) largely due to a Provincial review currently underway on the Regulated Rate Option (RRO). Calgary very well may be forced to change their LAF formula due to changes in the regulatory framework. Council will be getting a further update on this conversation in March of this year at the Strategic Meeting of Council and has specifically asked for a presentation that can be publicly released. Much of the December presentation had to stay in closed session due to the inclusion of sensitive data supplied by ENMAX for the conversation.
I am still very much of the opinion that we need to change the LAF formula to one that favours long term stability for the benefit of both residents and businesses in Calgary. I still believe it was a mistake for our formula to be attached to the RRO and therefore so attached to market factors that complied affordability issues on Calgarians at the worst of times.
Council will be looking at this again in more detail on March 18th and I intend to see Council come out of this next conversation with direction for Administration. I believe stability needs to be the priority for the future and removing the volatility of the energy market from our calculation.
Local Access Fee in Calgary
There has been a lot of reporting on this issue over the summer as concern from Ward 12 and all Calgary grows. You can find in-depth reporting with a simple online search but be warned, not all of the reporting has genuinely attempted to unpack the complexities. It is far too convenient for many outlets to call foul, assume the worst, and feed the fear and frustration. Here is a great piece that can help provide nuanced context to the conversation:
The Mid-year Performance Report is a window for Council and Calgarians into progress on the 2023-26 Service Plans and Budgets for the first six months of 2023. Of note, there was a report on the anticipated operating variance that The City ends up with yearly. The City isn’t allowed to run a deficit so there is always a positive variance but the size changes from year to year. This year the Local Access Fees (LAF) is collecting unusually large amounts due to Calgary’s LAF being connected to the variable energy prices (Regulated Rate Option or RRO) that have been at record highs recently. It is important to note that all the fees collected generally go back to Calgarians through the Reserve for Future Capital (Policy CFO03) unless otherwise directed by Council towards similar priorities outlined by Calgarians.
The unfolding convergence of an affordability crisis, skyrocketing energy prices, and Calgary’s LAF led me to ask Administration this question at Council on Dec 20, 2022:
“The Local Access Fee is set by The City of Calgary and appears as a line item on ENMAX bills. My understanding is that the LAF distribution charge remains the same but the floating electric Regulated Rate Option (RRO) upon which the Local Access Fee is calculated has risen significantly in December. This has contributed to increases in monthly bills as energy prices rise higher than they have ever been before. For Calgarians wrestling with inflation on multiple fronts, is Council able to revisit the Local Access Fee contract with ENMAX?”
This question turned into a presentation from Administration, in closed session, on March 21st of this year. At this meeting, Council learned a great deal about our LAF and how it has performed well for Calgarians since 1974. The last review of the LAF in 2014, and the previous seven reviews, all came to the conclusion that the existing contract was best for Calgary. This is a fact; it was what was best for Calgary up until around 2008. Historically energy prices have been relatively low and stable which led to Calgary's Local Access Fee predominantly benefiting all Calgarians on their monthly bills. My concern, shared in that meeting, was that this benefit was inevitably marching towards becoming a problem and a big enough problem that Council might need to look at making a change. In that meeting, I also spoke to my displeasure with Admins rationale for keeping the LAF the same to provide “a natural hedge” for its own energy expenses. I don't believe The City has a solidly defensible position to continue with business as usual. I further believe it makes sense for Council to consider a change because removing the RRO from the LAF calculation will lead to more certainty for businesses and other community partners now and into the future by removing the variability currently attached to the LAF.
Over the summer Mayor Gondek, responding to growing concerns in the community, issued a press release urging Administration to bring Council back together to discuss the need for change. This conversation is set to happen next Tuesday at Council (Sept 12, 2023). I will head into that conversation with an open mind as these decisions cannot be taken lightly.
I was elected to advocate for Ward 12 and all that call Calgary home. We (Council) are looking out for you, have heard you, and will keep looking at every opportunity to make life better every day.
I will update this blog after the meeting on Sept 12th and encourage you to reach out with any feedback related to this ahead of Sept 12th. Email: [email protected].
Sept 12 Update
Council was given a presentation on the impact of Local Access Fees and we were able to provide feedback both in public and in-camera. The timeline was not satisfactory to me or my colleagues, as a report would not be due back until next year.
Ultimately, we needed to amend the recommendations in order to expedite the process, and it was successful by a unanimous vote. On October 3, we will receive a report back to Council outlining the history of the LAFs, potential changes and a history of revenue provided to The City through these fees.
Following that, we will receive a report on December 19, 2023 with greater detail on what a potential change to LAFs could look like in today's context as well as impacts to The City's budget and to utility ratepayers in the city.
That with respect to Verbal Report C2023-0959, the following be adopted, after amendment:
That Council direct Administration to:
1. Bring a briefing back to Council on 2023 October 3 Public Hearing Meeting of Council on:
a. the history of Local Access Fees;
b. any previous research conducted into potential changes to Local Access Fees; and
c. a history of surplus local franchise fee revenue that has been added to the Reserve for Future Capital and an overview of spending on City of Calgary projects from that reserve since 2008
2. Report back to the 2023 December 19 Strategic Meeting of Council on:
a. what a potential change to Local Access Fees could look like in the current volatile environment;
b. what the budget implications to The City of Calgary would be; and
c. what the positive impacts could be for Calgarians.
3. Report back through the 2023 November Adjustments to the 2023-2026 Service Plans and Budgets on options to provide an affordability program for Calgarians in advance of any potential changes to Local Access Fees.
4. Direct that the Closed Meeting discussions be held confidential pursuant to Section 24 (Advice from officials) of the Freedom of Information and Protection of Privacy Act.
|Councillor Carra, Councillor Chu, Councillor Demong, Mayor Gondek, Councillor Sharp, Councillor Spencer, Councillor Walcott, Councillor Pootmans, Councillor McLean, Councillor Wyness, Councillor Mian, Councillor Penner, Councillor Chabot, Councillor Wong, and Councillor Dhaliwal
I look forward to these conversations and to looking for ways to reduce the financial burden on Calgarians while we weather these higher utility costs. While we won't see any changes to the way we calculate fees in time for this winter's energy bills, I am optimistic that we can make an impact on this issue affecting both businesses and residents locally.
As always, please email me at [email protected] if you have any questions
Councillor, Ward 12