The City Council of Webster City will once more ask voters whether Black Hills Energy should continue to be the city’s sole supplier of natural gas. The gas company’s agreement with the city ends next March, but a vote of local ratepayers will determine its future in Webster City this November.
As approved by the city council, a measure will appear on the November general election ballot, identified as Proposition A, and will read as follows:
“Shall the City Council of the City of Webster City, in the County of Hamilton, State of Iowa, be authorized to lease Webster City’s gas utility distribution system to another utility for its use to sell, distribute and supply natural gas to Webster City and its inhabitants, including entering into a long-term lease, or use agreement, future agreements and extensions thereof and future agreements thereafter?”
The story of natural gas sale and distribution in Webster City has a long, and sometimes contentious, history.
In 1920, Webster City voters approved bonds for building a natural gas plant and distribution (pipe) network throughout the city for those wishing to use gas in their homes. In this era, though, many Webster Citians, and people across the nation, feared the extreme flammability of natural gas and declined to allow it in their homes or businesses.
Even today, a burning cigarette, flipping a light switch, an errant spark, or using a cell telephone can cause a catastrophic explosion. An estimated 286 natural gas explosions occur every year in the United States, the most common cause being a leak in the distribution lines.
The city owned and operated its gas utility for 24 years. In 1944, as World War II was winding up, People’s Gas Company, a division of Northern Natural Gas Company of Omaha, was awarded a 15-year lease by local voters. The franchise was extended a further 15 years in 1959.
In the 1960s, a group of Webster City businessmen brought a lawsuit to stop the city from operating its natural gas utility, naming the city itself as well as individual council members. People’s Natural Gas later joined the plaintiffs. The case went all the way to the Iowa Supreme Court, which confirmed the city’s ownership rights to the natural gas infrastructure, and its ability to hold elections to determine whether, and which, private companies should operate the system.
The succession of mergers, acquisitions and owners of People’s is too complicated to relate here, but eventually its business was owned by Aquila, Inc., a firm incorporated in 1926 in Kansas City, Missouri, as Missouri Public Service Company. At the greatest extent of its operations, it was an international electricity and natural gas utility, operating generation and distribution networks in seven U.S. states, in parts of Canada, and in the United Kingdom, New Zealand and Australia. It once ranked No. 33 in the Fortune 500 list of the world’s largest industrial corporations.
A story in the November 19, 1993, Daily Freeman-Journal read: “Prospects of City Taking Over Gas Utility Likely to Increase.” Bob Haug, executive director of the Iowa Association of Municipal Utilities, told the City Council: “There’s no doubt the cities are up to the task of meeting the competitive challenge of 636.” (Order 636 was federal legislation that deregulated the natural gas industry).
Haug cited several advantages for cities to own and operate their own natural gas systems, including savings from the ability to bill customers for electrical, gas, water and sewer services on a single invoice. While he stopped short of guaranteeing lower costs for gas users in Webster City, he noted municipally-owned utilities often had considerably lower rates than investor-owned utilities. He finished up, saying: “Gas is a regulated monopoly which can’t be considered free enterprise,” concluding that cities taking over operation of gas utilities offered the only real competition in the industry.
Aquila was granted a 20-year franchise in Webster City on February 21, 2005 — that is the lease that is now about to terminate.
On July 14, 2008, Aquila was acquired by Black Hills, a company with natural gas operations in Colorado, Kansas and Nebraska, as well as Iowa.
The Daily Freeman-Journal spoke to Nicole Breitbach, senior public affairs manager for Black Hills, asking her to make the case for the company retaining its franchise in Webster City. She said: “We’ve been providing natural gas to Webster City for 78 years, and have had a good partnership with the city. We’ve kept communication lines open, and look forward to a continued partnership. We’re a part of the community, with 17 employees in Webster City. We invested in the future of our partnership by opening a new operations center in 2021, and donated to the mini-pitch court in East Twin Park.”
The city is negotiating with Black Hills, and may be close to reaching an agreement, according to Ahlers & Cooney P.C., a Des Moines law firm retained by the City of Webster City.
At issue, among other concerns, is an increase in the fee Black Hills pays the city for access to the natural gas distribution system — presently $156,000 a year with a 2% increase each year. The proposal now being discussed by the parties would set the usage fee at $242,439.65 a year with a 2.36% escalator clause each year.
Councilman Logan Welch had this to say about the situation: “The 25-year lease agreement between Black Hills Energy and Webster City for the use of our pipeline is up for renewal soon. It is statutorily required for the citizens of a community to put to a vote the direction they want to go on leasing of public equipment and grounds. Ideally, Webster City and BHE can negotiate out a mutually acceptable and economically beneficial agreement to move forward together.
“The alternative would be to become a gas utility to ourselves. This comes with pros and cons. We will present this newly negotiated lease to the community after we dial it in and ask for our citizens’ help to decide the direction via a vote.”
View this article as it originally appeared in the Daily Freeman-Journal.
Last modified: August 20, 2024