Ask the Town: Franchise Fees

During the October 16, 2018 Hinton Town Council Meeting, your Hinton Town Council approved an increase to franchise fees for our community. 

This Ask the Town breaks down what a franchise fee is, how Hinton compares to other communities, and what franchise fee revenues are used for. 

What is a franchise fee?
From the Alberta Utilities Commission: Section 45 of the Municipal Government Act grants municipalities the right to enter into a franchise agreement with a chosen utility. Included in the agreement are provisions for the utility to collect linear taxes and often a franchise fee or local access fee on behalf of the municipality. The municipality determines the level of fees. 

What this means is, a linear tax is charged to the utility for the right to use the municipality’s property for the construction, operation and extension of the utility. The franchise fee or local access fee is the charge paid by the utility to the municipality for the exclusive right to provide service in the municipality. Franchise fees and municipal taxes are considered to be a cost of doing business in the municipality, and therefore, these costs are recovered from customers by the retailer. Linear taxes and franchise fees/local access fees are usually combined together on consumer bills in one line item. 

What does this increase mean for the average consumer?
For every 1% change, the residential impact is averaged to 96 cents per month, or just under $12 annually (assuming 625 Kwh and 30 days).

Council has approved a 2% increase, which will make roughly a $25 annual impact to the average residential consumer. The estimated impact to the municipal revenue from this increase is approximately $240,000 annually.

How does Hinton’s Franchise Fee compare to other Communities?
Over 85% of communities administer a franchise fee. The average of those communities that do implement a fee is 10.1%, meaning this increase will put Hinton just beyond the average franchise fee. 

How will this increased revenue be utilized?
Franchise fee revenues will be used to bolster reserves. The Town of Hinton is actively working to ensure adequate reserves are in place as part of our 2019 Budget process. 

The Town of Hinton will share further information in an Ask the Town about reserves, budgeting for reserves, and asset management in the coming weeks.

Watch both local newspapers or your inbox to learn more. 

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