Gas fee increase approved by Metro Council
The Louisville Metro Council has approved a franchise agreement with Louisville Gas & Electric Co. that would set a new fee on natural gas transmission of 6 percent.
This fee would be three times higher than the franchise agreement council members approved two years ago which carried a 2 percent natural gas fee. The agreement expired in March after negotiations between city leaders and LG&E representatives stalled. Under that 2 percent fee, the city received about $5 million in revenue a year, and typical customers paid about $1 a month.
According to the ordinance that the council passed Thursday evening, 18-4, the city is expected to receive about $1.05 million a year under the new deal.
The agreement, however, is subject to approval by the Kentucky Public Service Commission.
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The Metro Council majority asked the county attorney’s office to oppose before the state commission any effort by LG&E to pass the cost of the fee on to users. If it does, the typical customer would probably pay about 20 cents more a month on their gas bills.
The rationale for charging LG&E the fee was intended as payment for laying lines on city-owned public rights-of-way and produce money that might offset the cost of repairing streets torn up by utility.
LG&E spokeswoman Chris Whelan said recently that LG&E will try to persuade the state commission to authorize passing the recovery of the fee on to customers.
The council members are proposing to tax natural gas volume for larger industrial clients such as Ford or UPS. They tend to receive natural gas from another supplier and use LG&E’s pipeline system to transport the gas to their facilities.
Council members who voted against the agreement Thursday were: Barbara Shanklin, D-2nd District; Cindi Fowler, D-14th; Julie Denton, R-19th; and Brent Ackerson, D-26th.
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Councilman Kevin Kramer, R-11th, was the primary sponsor of the ordinance to approve the five-year franchise agreement. He said it would treat customers equally and establish an equitable way to charge LG&E for using publically owned rights-of-way. Kramer said the ordinance stipulates that if the city loses its case before the state commission that governs what utilities can charge, the franchise fee would be reduced to zero percent.
Ackerson said that LG&E will find a way to pass the cost on to consumers and probably would eventually seek a rate increase to do so.
Greater Louisville Inc., the metro business-friendly organization, had expressed “serious concerns and reservations” about the fee on natural gas. GLI officials said they were concerned about the impact of imposing the fee primarily on local industry as well as the impact of the fee on the overall local tax burden and whether it might dampen efforts to recruit new industry.