The Covington Board of Commissioners is considering establishing regulations that would mandate a franchise agreement, or contract, between the city and electric providers.
The board completed the first reading of an ordinance issuing this mandate at the legislative meeting on April 9 and will perform a second reading before casting a vote on the ordinance at the next legislative meeting on Tuesday, April 23.
Specifically, the proposed ordinance would require utility companies to bid on the right to use city land and space to install their cables, poles, equipment and other infrastructure. The ordinance would also allow the city to enact a franchise fee, or tax on utilities, of up to 5%, which would be passed on to the consumer. Covington’s current franchise fee is 3%. The franchise agreement would last for 20 years.
Although the ordinance would pertain to any power provider, Duke Energy, the primary provider in the Northern Kentucky and Greater Cincinnati Region, has been the focus of much of the conversation. Duke provides electricity to most of Covington with the exception of a small portion of residents in South Covington, who get their power from Owen Electric. Duke and Covington have not had a franchise agreement since the 1980s.
“Basically, anybody who uses public property has to have a written agreement with the city–a lease, a license or something,” Mayor Joe Meyer explained at the caucus meeting on April 2. “The only one who doesn’t is Duke.”
Covington City Solicitor David Davidson stated at the same meeting that the city had been in various negotiations with Duke for at least two years and argued that Duke, in the absence of a franchise agreement, had been arbitrarily setting its fees with the city, at least in specific areas, when compared to other cities. In a conversation with LINK nky in the subsequent weeks, Davidson characterized Duke as a de facto “monopoly,” although he was quick to assert that the legal tension stemmed not from any enmity between the city and Duke but rather a simple disagreement.
Some of the issues Davidson mentioned include opaque pricing structures on specific pieces of land and difficulties in dealing with third parties that Duke has allowed to use its infrastructure. Davidson claimed that anytime some other entity, such as Spectrum, used one of Duke’s poles, getting them to cooperate could be more difficult than if the city was just dealing with Duke directly.
Brian Pokrywka, one of Duke’s in-house lawyers, spoke to the board of commissioners on April 9, arguing that a franchise agreement wasn’t necessary.
“For more than 140 years, since 1881, Duke Energy through its predecessor companies has provided, for a while, affordable electricity to the city of Covington without any form of franchise agreement in place,” Pokrywka said.
Pokrywka declined to comment further when asked to elaborate, but Duke sent LINK nky a statement via email, reiterating its position.
“For more than a year, Duke Energy Kentucky has been working to resolve a discrepancy with the city regarding this perpetual agreement,” the statement reads. “Unfortunately, those efforts have not been successful. But Duke Energy Kentucky remains steadfast in its ongoing commitment to serve its Northern Kentucky customers, including those in Covington.”
If the city and Duke are unable to reach an agreement on the matter, Duke could potentially sue.
But what does this mean for normal Covington residents? Will their service be affected, and will their utility rates change?
Service will not be affected by the passage of the ordinance or any legal battles that might follow, as there is nothing in the ordinance that would prevent Duke from delivering to customers.
As for rates, Duke (or any provider) can’t simply change its rates at will. Rate increases must be approved by the Kentucky Public Utilities Commission, which regulates service areas and rates throughout the state. If Duke wanted to increase its rates, it would have to legally petition the commission and make its case. The Kentucky Attorney General’s office acts as a consumer advocate in such proceedings, making the case for why rates should not change. The commission then adjudicates the decision on whether to allow a rate increase.
There is currently no indication from Duke they plan on raising rates.
Even if the city passes the ordinance and another provider, such as Owen Electric, outbids Duke for the contract, Duke would still own many of the poles, cables and other infrastructure in the city. Owen would have to buy up that equipment to expand its service area.
A franchise fee increase would depend on the commission’s willingness to raise the fee rates. Discussions on this possibility have not yet occurred in public settings.
In other words, it’s possible people’s bills could go up, but there’s currently no indication that such a scenario is likely, even if there ends up being a legal battle between the city and Duke.
“If there’s a concern in the public that this might lead to higher electrical rates, it shouldn’t,” Davidson told LINK nky, “And the only way it could is if the Public Service Commission should allow it.”
The board of commissioners will complete a second reading of the ordinance and cast a vote at their meeting legislative meeting on Tuesday, April 23, beginning at 6 p.m. at Covington City Hall on Pike Street.