Pensacola must refund between $18M and $20M to gas customers, judge rules

Pensacola will have to repay between $18 million and $20 million in unlawfully collected natural gas franchise fees , a judge ruled Thursday.

Escambia County Circuit Court Judge Jan Shackelford ordered the city to return the fees plus interest to Pensacola Energy customers inside the city limits after ruling the city has been collecting those fees without legal authority.

City spokesperson Jason Wheeler said the city is reviewing the order.

"We are currently working with outside counsel to determine our next steps, which may include an appeal," Wheeler said. "Therefore, it would be inappropriate for us to comment any further."

The ruling came from a 2015 lawsuit that has been quietly circulating through the courts for the past nine years.

Previously: Pensacola Energy customers could get refunds if judge rules against city

Pensacola chiropractor Eric Frank filed the 2015 lawsuit, alleging that the city had been unlawfully collecting franchise fees on customers inside the city limits since 1970.

Governments typically charge franchise fees to private utility companies to use public right-of-way to deliver service. Frank's lawsuit alleged ordinances passed in 1970, 1988 and 1991 never authorized the city-owned natural gas utility, Pensacola Energy, to collect fees on customers. Before 1991, the fee was charged but not disclosed to customers, according to the ruling.

Attorneys Matt Dannheisser and Artie Shimek, who represented Frank in the lawsuit, praised the ruling in a press release on Friday.

Shimek explained the core issue of the case in the announcement.

"Basically, the city is charging rent to itself to use its own property and illegally billing the customers for it," Shimek said. "As opposed to the likes of (Florida Power & Light) or Cox Cable, as examples, who do not own the rights of way and thus require the city’s permission to use that property, the city of Pensacola owns its own rights of way and does not need to obtain permission from itself to use its own property.”

Frank's lawsuit was granted class-action status in 2019 to represent all city residents who were Pensacola Energy customers.

"It was completely illogical for the city to charge itself a fee, but it became spurious when the city mandated its own citizens pay those illogical charges," Dannheisser said in the press release.

The city argued in the lawsuit that since 1991, it has reduced the rate it charges for gas to completely offset the franchise fee, so customers are not paying more than they otherwise would have.

Shackelford's ruling found that based on depositions given by the city's former finance director and deputy finance director, the city did not offset the cost of the franchise fee for municipal customers.

"The 1991 ordinance is the only law the city presently cites to justify the imposition of the franchise fees, yet its plain meaning does not grant the city the authority to collect the franchise fees from municipal customers," Shackelford wrote.

Customers were paying a 6% franchise fee plus an additional 10% public service tax on those fees, which meant Pensacola Energy customers inside the city have paid 6.6% more than they should have, according to Shackelford's ruling.

From the archives: City of Pensacola sued over gas company fees

Unless the city appeals and wins the appeal, it will have to return all fees it has collected since 2011. According to the ruling, the city began charging a franchise fee from its gas utility in 1970 and has been calculating the fee based on gas sales since at least 1981. However, because of a four-year statute of limitations, the city must only return money it collected four years from the beginning of the lawsuit.

The attorney's announcement of the ruling estimated the amount to be returned will be between $18 million and $20 million, and between 20,000 and 30,000 current and former Pensacola Energy customers may be entitled to receive money. If the ruling stands, the court will oversee a claims process, and customers will be notified of their right to a refund.

The announcement also quoted Frank, who brought the lawsuit to his two attorneys.

"I am most appreciative that Artie and Matt understood the problem and were willing to devote nine years fighting to correct an unfairness that should not have occurred in the first instance," Frank said.

This article originally appeared on Pensacola News Journal: Pensacola must refund between $18M and $20M to gas customers, judge rules