A $1.2 million tax increase could be in the works for most of the natural gas customers in the city of Wichita.
The City Council was scheduled Tuesday to consider a 20-year, 23.6 percent increase in the franchise fee on gas sales by Kansas Gas Service.
City Manager Robert Layton said Monday it’s being pulled from the agenda to give the city more time to get signatures from gas company executives on the negotiated contract.
The franchise fee is a direct charge to gas customers collected through their monthly bills, much like a retail store collects and remits sales tax to the city, said David Nickel, consumer counsel for the Citizens’ Utility Ratepayer Board, the state agency that represents residential and small-business utility customers.
“It’s a tax,” Nickel said. “They might call it a fee, but that’s just added to the (gas company’s) delivery charge. It’s just simply a line item that’s set by the city.”
The charge is based on individual gas usage, so the amount can vary widely from customer to customer, Nickel said. The company estimated the cost for a typical residential customer at $5.73 a year, or a 1.1 percent increase in the overall gas bill.
“Although Kansas Gas Service includes the franchise fees as a line item on customers’ billing statements, all the monies collected are passed through to the city,” company spokeswoman Dawn Tripp said in an e-mail.
The current franchise agreement with Kansas Gas expired in August 2018, but remains in force during renegotiation of the contract, according to a report from the city’s legal department.
Under the current agreement, Kansas Gas collects and pays the city an amount equivalent to 5 percent of its gross revenue, plus permit fees for excavation work when the company has to dig up city right of way to install or replace underground lines.
In the new proposed agreement, Kansas Gas would pay 6.1817 percent for the franchise fee, but will no longer have to pay the permit charges.
“In 2018, revenue from KGS was $5,426,283,” the staff report said. “The estimated increase of revenue to the City is approximately $1,218,000.”
Kansas Gas Service has approximately 117,000 Wichita customers, Nickel said.
Black Hills Energy, the other gas company that serves parts of the city, has about 35,000 customers.