Pensacola may pay up to $15.9 million in a settlement over franchise fees charged to Pensacola Energy customers.
The Pensacola City Council will vote May 22 on whether to approve a settlement agreement in a 2015 class-action lawsuit, with approximately $12.6 million of the settlement going to refund franchise fees of Pensacola Energy customers who have lived inside the city limits since 2019.
The lawsuit arose in 2015 when Pensacola chiropractor Eric Frank alleged that the city had been unlawfully collecting franchise fees on Pensacola Energy customers inside the city limits since 1970.
An Escambia County Circuit Court judge ruled that Frank was right and the city had indeed unlawfully collected the fees. The lawsuit was filed in 2015, and because of the statute of limitations, the city would only be liable for fees collected after 2011.
Frank’s attorneys estimated last year that the unlawfully collected fees could amount to between $18 million and $20 million.
The $15.9 settlement awards Frank $50,000 directly and $3.25 million for his attorneys fees and costs associated with the 10-year long lawsuit, which included depositions of current and former city officials.
The money for the settlement will come out of the reserve funds of Pensacola Energy.
What is Pensacola Energy being sued for?
In the lawsuit, Frank alleged 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 that 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.
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 Escambia County Circuit Court Judge Jan Shackelford’s 2024 ruling.
What did the judge rule?
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. Shackelford’s order was in the form of a partial motion for summary judgment, which means there are many more issues to work through on the case – such as how eligibility will be determined for refunds – before the order becomes final.
If the City Council approves the settlement during its May 22 meeting, then the judge would still have to approve it and enter a final judgement in the case.
This article originally appeared on Pensacola News Journal: Pensacola considering $15.9 million settlement with natural gas customers
Reporting by Jim Little, Pensacola News Journal / Pensacola News Journal
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