Council Rejects LG&E Agreement, Fee Increase

by admin on May 9, 2011

Questioning the fairness of the plan, the Louisville Metro Council’s budget committee delayed action on a new franchise agreement negotiated between Mayor Greg Fischer and the Louisville Gas & Electric Co., saying the administration must come up with a better deal.

The mayor’s plan would generate $5.4 million in new revenue for the city by raising rates on natural gas customers by three percent. Council members rejected the proposal because under state law Metro Government cannot force any rate increase on residents who live in the 81 smaller cities such as St. Matthews and Shively. That means about 20 percent of the city’s population would not be affected by the administration’s proposed fee increase

Councilman Kevin Kramer, R-11, says besides being unfair, the proposal is equivalent to a tax hike on residents because it has nothing to do with natural gas costs.

“It absolutely will say to folks who live in one portion of the community you’re going to bear a greater cost to the city of Louisville than people who live in another portion of the community,” he says. “They’re not bearing a greater cost because gas costs more there. They’re paying more because the city of Louisville wants to gather more money…because we want to raise more revenue.”

Metro Government is facing a $22 million shortfall, which part of the additional revenue would be used for under Fischer’s proposal. According to the mayor’s office, $3 million in the new revenue would be used to balance the deficit while the other $2.4 million would restore certain city services cut by former Mayor Jerry Abramson, such as junk pickup and street cleaning within the old city limits.

During the hearing, the administration admitted it was frustrated by the state law that binds the council’s hands to raise the fee and suggested waiting for a change to merger law by the General Assembly, which hasn’t amended the legislation since it was approved by voters in November 2002.

“My suggestion might be that we would come back to you with another franchise agreement after the legislative session meets to deal with an economic fee that we may charge,” says Chief Financial Officer Steve Rowland, who acknowledged the deal is unfair, but said the city is being under valued in the current agreement.

The current contract generates just over $500,000 annually for Metro Government, which is much lower than average compared to other cities. In Lexington, for instance, the city government collects $9 million each year  from its utility franchise fee for electric services.

The budget committee voted to table the agreement indefinitely.

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