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Utility charges on your bill include four types of costs: energy costs, transmission costs, distribution costs and administration fees. All of these appear on your monthly bill for both electricity and natural gas.
Depending on your service provider and arrangement, you may also see other municipal charges which contribute to your monthly total, such as water, sewer and a municipal franchise fees (also called local access fees). Franchise fees or local access fees are charged by the municipality for the use of land for power lines, substations or other infrastructure within the city or district.
Electricity distribution rates vary between distribution companies in Alberta because each company’s customer base is not the same. For example, a distribution system that serves mainly rural areas will cost more than a system that serves urban areas because the distribution company has to build, operate and maintain more poles, wires, and facilities to serve each customer. The number of customers on a distribution system will also impact the cost-per-customer. With more people covering costs, it will cost each person less.
Administration fees, such as franchise fees, are largely the result of municipal agreements with utility providers granting them exclusive rights over a certain territory and in lieu of certain taxes. In some cases these fees can be examined by the AUC in open, quasi-judicial proceedings. Applicants must demonstrate the costs are reasonable and interveners are welcome to demonstrate otherwise. The AUC approves such fees based on the evidence that is brought before it.
As an independent regulator, the AUC is responsible for determining most of the rates charged to utilities customers particularly for those who have not signed competitive retail contracts where rates and the term are set pout in the contract. When setting rates it is important for the AUC to keep customer utility rates low, but it must also provide a fair and reasonable return for each utility company.
The determination of transmission and distribution rates is based on the utility company’s investment in utility infrastructure and the costs to maintain that infrastructure. The AUC’s determination begins with an application by the utility company. In the application the utility company requests approval of the rates based upon forecasts, operating costs and capital investments. These rates are then reviewed and scrutinized. The rates are challenged in an open proceeding , where costs are reviewed line by line to determine reasonableness of the costs submitted.
In these proceedings, residential utility customer interests are brought forward and advocated for by consumer groups such as the Utilities Consumer Advocate and the Consumers’ Coalition of Alberta. Commission members review the costs submitted and also ask questions about the application to ensure that all facts are brought forward by parties, to make arguments and provide evidence to prove those arguments. After the Commission members look at a number of cost categories that make up the total requested budget, the AUC makes a decision that essentially sets the calculation used to determine the amounts charged in utility customers bills.
The AUC always does what it can to constrain the magnitude and escalation of both transmission and distribution charges paid by Alberta ratepayers, and some of these steps pre-date the current economic downturn. One initiative was the implementation in 2013 of performance-based regulation. Under this regime, which applies to all Alberta regulated electricity and natural gas distribution companies, distribution rates are constrained to the rate of inflation, less a productivity factor. The goal of performance-based regulation is keep rates lower than they might otherwise be, while protecting reliability and safety.
If you have a billing issue or a concern about the terms and conditions of your utility service, you should contact your utility company first to try to resolve the issue. If you are unable to get resolution, the Utilities Consumer Advocate can work with you to advocate and mediate on your behalf. If you have further questions you can also contact the AUC at 310-4AUC (310-4282) or firstname.lastname@example.org. In addition, if you have agreed to a retail contract for your service, the AUC is not involved in rate determination or terms of service for these contracts.