The City of Covington filed suit against Duke Energy this week over the company’s refusal to enter into a franchise agreement with the city.
“This is a classic case of a big institution thinking it can do whatever it wants and that it can ignore established, reasonable local ordinances,” said Mayor Joe Meyer in a press release from the city. “We have tried for years to get cooperation, but Duke refuses to follow even common rules of business practice, including following a bidding process and signing a franchise agreement as required by the state Constitution and as it willingly does with virtually every other city in which it provides service. Duke is not above the law.”
The city filed suit with the Franklin County Circuit Court and the Kentucky Public Service Commission, which is responsible for setting utility rates in the commonwealth, on Wednesday. The City Commission voted on Oct. 22 to allow the city’s legal department to begin the process of bringing suit against the company.
“Regardless of the outcome, the legal fight will have zero effect on customers’ rates and the availability of electric service,” said the city in its announcement.
Franchise agreements are contracts between utility providers and cities. They usually entail a city charging a fee in exchange for allowing the company to work and maintain its infrastructure on public streets.
The city passed a requirement for franchise agreements in May and approved a franchise agreement with Owen Electric Cooperative in October. Most city residents use Duke Energy for their utilities, although some residents of South Covington use Owen.
Duke has repeatedly affirmed that a franchise agreement is unnecessary.
Brian Pokrywka, one of Duke’s in-house lawyers, made this case to the board of commissioners at a public meeting on April 9.
“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 in April.
The city’s suit asks the court to deny Duke’s argument and the utility commission to force Duke to follow the city’s bidding process as Owen did.
The city’s legal department points to a U.S. Supreme Court case from 1904 , Shaw vs City of Covington, involving Duke’s predecessor company , which the city argues extinguished the perpetual franchise Duke argues its held since the nineteenth century.
The legal opinion from Supreme Court Justice Oliver Wendell Holmes Jr. cited in the city’s announcement states the “[e]xclusive privilege to operate did not transfer to the electric company…”
In the city’s announcement, the mayor lays out what he sees as the issues with Duke’s refusal to comply:
- Business owners and residents are required to inform Duke about painting and other work that takes place around Duke’s poles and wires, “but the company is slow to respond and in one case billed a restaurant owner $3,000 to perform the service,” according to the city’s press release.
- Duke will sometimes subcontract and lease their infrastructure with other companies, such as Spectrum, but the city argues Duke rarely informs them when it does this. As a result, the city alleges, “those companies then effectively operate in secret within Covington and are able to evade paying required taxes and fees like everyone else. Duke’s refusal to provide this simple information also delays streetscape projects and residential and commercial development, leading to increased wear and tear on vehicles, more traffic congestion and increased construction costs.”
- Duke does not adhere to city restrictions on right-of-way encroachments.
“Franchise agreements at their core are about establishing a fair, equal and level playing field, so to speak, where there is mutual respect and a strong working relationship beneficial to all sides,” said City Attorney Frank Schultz. “Right now, Duke operates as if the concerns of Covington’s businesses, residents and lawmakers are of no importance. Duke has no incentive to listen to the public’s concerns because they think they have the right to operate as the City’s exclusive electric service provider until the end of time. We think the U.S. Supreme Court terminated that alleged right 120 years ago.”
Read the full complaint filed by the city below.