Leavenworth city commissioners have talked a lot recently about making spending cuts as they've reviewed the proposed 2014 budget. This week, they also talked about increasing the revenue the city receives from natural gas franchise fees.
But this revenue increase could mean additional costs for some commercial natural gas customers in the city. The change would result from the renewal of a franchise agreement between the city and Kansas Gas Service.
Commissioners eventually will have to approve an ordinance to renew the agreement. But they reached a consensus Tuesday regarding what fees they want included in the agreement.
According to City Clerk Karen Logan, the renewal initially would increase the money the city receives by an estimated $14,000 per year by expanding the number of customers who pay a 5 percent franchise fee. Later on, the revenue would increase by an additional $40,000 per year because commercial customers who purchase natural gas from third parties would be charged an additional fee.
The ordinance, if approved, will grant Kansas Gas Service a franchise, allowing the company to continue its operations in the city of Leavenworth. The new agreement would go into effect Nov. 1.
Under the terms of the existing agreement, which was implemented in 2003, customers in the city who purchase their natural gas from Kansas Gas Service are charged a 5 percent franchise fee based on gross cash receipts, and the money is turned over to the municipal government. But customers in the city who purchase natural gas from third parties haven't been faced with this 5 percent charge.
"They weren't paying any franchise fee," she said.
Logan said this would have been addressed by a second ordinance. But such an ordinance apparently was never adopted in 2003.
Logan said there are currently about 25 entities in the city that purchase natural gas from third parities. And the city of Leavenworth is one of them. The city purchases natural gas this way because it can receive a better rate.
In the case of these 25 organizations, the gas is still transported through Kansas Gas Service lines.
Logan said the new agreement could extend the 5 percent fee for gross cash receipts to all customers, even those who purchase natural gas from third parties.
The organizations that purchase natural gas through third parties also can be charged an additional fee based on the volume of gas transported through the lines.
Commissioners supported implementing this additional fee, but it will be phased in. Logan said the customers that currently pay no franchise fee initially will be charged the 5 percent fee that residential customers already are paying. Beginning Nov. 1, 2014, the 25 customers who purchase natural gas from third parties will be charged an additional volumetric rate of 3 percent. The volumetric rate will increase to 4 percent a year later. The volumetric rate then will reach its peak of 5 percent in November 2015.
Page 2 of 2 - Logan said residential customers in the city who already are paying the 5 percent franchise fee shouldn't see any rate increase as a result of the renewal of the agreement.