The Wichita City Council unanimously approved a 22% increase in the franchise fee it charges by Kansas Gas at its December 17 meeting, knowing the fee hike will be passed along to consumers. The fee increase is part of the new franchise agreement with Kansas Gas.
The fee is for the sale and delivery of natural gas in the city of Wichita. The 20-year agreement replaces an expired agreement and raises the franchise fee from 5% to 6.1817% percent of gross receipts. The city estimates it will collect $6.6 million annually from the agreement, which is an increase of $1.2 million. But since the fee is based on gross receipts, the gain to the city and the impact on customers could be higher if the cost of natural gas goes up.
Kansas Gas is allowed to pass the higher fees onto customers according to Linda Berry with the Kansas Corporation Commission. In a statement to the Sentinel, Berry said, “Per Kansas law, the utility is allowed to recover those fees from customers. Essentially it is a pass-through cost of doing business.”
One justification for the increased fees according to Wichita City Attorney Jennifer Magana was to diversify the revenue in the City’s General Fund.
“The fees 30 years ago were 2.8% of the general fund. This will increase them. In 2018 they were only 2.3%. So this will bring it back into alignment,” said Magana.
In other words, other city revenues increased at a faster pace to keep up with city spending, and now the city wants more revenue. City officials also say the franchise hadn’t been increased for many years.