Mayor Kenneth Hollis voted against the motion, along with councilman Billy Whitley. Council members Lawrence Hollis, Ray Bilbry, and Bobby Etheridge voted to grant the franchise to CI, Inc.
Representatives of the Tennessee Regulatory Agency, Receivership Management, Inc., and CI, Inc. all spoke to the council members, with Jeanne Bryant, president of the Receivership, explaining that if the franchise was not granted to CI, that all monies owed by the former owner of RBS Gas Utility would have to be repaid, requiring a 42 percent increase in current gas rates to the city's 200 residential customers.
If the franchise had been granted to CI, Inc., rates would increase by a more modest 20 percent over current rates. It was stated that the new cost under CI management would be about $16.50 per mcf. Currently, the city of Byrdstown, similar in population to RBS, charges rates of $17.08 per mcf. Lafayette city gas customers pay about $14.50 per mcf, due, it was explained, to a larger base of customers, and the ability to store gas and to buy it on the spot market.
City Attorney Jon Wells expressed shock and disbelief at the mayor and council's decision, asking if anyone wished to change their vote, after Whitley and Mayor Kenneth Hollis voted against the motion, effectively killing the deal, at least for the time being.
The result of this lack of action to grant a franchise leaves the utility in the hands of Receivership Management, and both Nestle (the gas utility's largest customer) and 200 residential gas customers face a 42 percent increase in their gas bills in coming months.
According to city attorney Jon Wells, the issue can be raised... again at the next meeting, set for March 8, 2007. Councilmen Spivey and Roark, both absent from Thursday night's meeting, might be present for reconsideration of the franchise at that time.
But Tennessee Regulatory Agency officials expressed disappointment at the council's action, which at least for the time being leaves the utility in receivership, and its future viability in doubt.
Receivership Management President Jeanne Bryant said this Monday that she was preparing a rate filing to present to the TRA that would raise the cost of gas to RBS Gas Utility customers to $19.08 per mcf, an amount which is approximately 42 percent more than customers are currently paying.
“With the failure of the city to accept the franchise agreement with CI, Inc., the receiver is required to recover sufficient funds to pay the current amount due Atmos Energy, and to pay back the TRA for the amounts paid in the the receivership,” Ms. Bryant stated.
In order to continue operation, the RBS Gas System must pay debts owed by the system. RBS gas customers have used approximately $350,000 in gas over the past three years that they have not paid for. The rules for gas systems regulated by the TRA allow for the recovery of gas used but not paid for by the customers from those customers.
Since there is no other source for funding, if the customers do not pay the anticipated 42 percent increase to pay the debt, then the system will have to be shut down.
With a city election set for early this year, the issue of natural gas costs, and why a mayor running for reelection would prefer to see natural gas rate increases double rather than grant a franchise for the concession to a non-profit corporation, should make for some interesting campaigning for the office. Three of the six city council seats are also up for election in April 2007.
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