Pascagoula considers sale of city’s gas services to CenterPoint Energy

Pascagoula considers sale of city’s gas services to CenterPoint Energy
CenterPoint representatives laid out a list of reasons this sale would benefit both the city and its residents at the Monday night meeting. (Knowles, Lindsay)

PASCAGOULA, MS (WLOX) - Residents of Pascagoula could soon have a new company managing their gas services. Pascagoula is considering selling the current city-run gas service to CenterPoint Energy, a move that would also affect Gautier since they pull natural gas from Pascagoula’s gas line.

Pascagoula Mayor Dane Maxwell says CenterPoint first approached the city in May after spending nearly two years researching Pascagoula and the gas system. Once a formal offer was made for the purchase of the gas system, a letter of intent was published in late October.

CenterPoint attorney Curt Hebert, along with area manager Jason Fabre, laid out a list of reasons this sale would benefit both the city and its residents at a public informational meeting Monday. Some of those benefits for gas customers include faster emergency response times, more bill payment options, and updated technology.

Gas customers would have the option of being able to level out their bills to be around the same amount each month instead of having higher bills in the winter when more gas is used," said CenterPoint. Another program would allow eligible customers with current accounts to have one bill a year paid for them.

Other benefits to the city and residents, CenterPoint said, include emergency response time.

“When you’ve lived through storms like Camille and Katrina and others down here, emergency response kind of goes to a different level,” Hebert said. "I know you’re kind of handicapped here with the group that is running it. You have 5, 6, or 7 (employees who can repair gas lines.) When there is a storm, you will have literally hundreds of people here helping you, making certain you get rebuilt. You’ll have literally hundreds of people making certain that you’re back online and that you’ll be flowing gas through the pipes you’ll be using.'

Another topic CenterPoint focused on at the meeting was the company's advanced technology that currently isn't available to the city. That technology includes updated equipment that can detect gas leaks sooner so that repairs can be made faster.

If customers have a problem with their gas lines, Hebert said CenterPoint's technicians are more skilled to repair them quicker because they only work on gas lines, whereas city utility employees make repairs to gas, water, and sewer lines. That means a faster response time with more knowledge about the gas lines, said Hebert.

Hebert discussed a number of other issues that would affect citizens of Pascagoula, such as the cost of gas services under CenterPoint, the repair and maintenance of gas lines, and how the company believes it will be more affordable for both the city and the people who live there.

One of the biggest things stressed by the CenterPoint representatives was the city's need for updated and safer gas lines, saying they plan on spending $23 million in the near future on upgrades. Those upgrades are necessary, said Hebert, thanks to new federal requirements to ensure more safety and fewer leaks.

One of those new requirements will require the steel pipe running through Market Street, which has been there since the 1940s, to be replaced.

One of the main concerns for residents is whether a new gas service will cost more money out of pocket each month. CenterPoint said the rates will be frozen for one year. However, they warned that whether they buy the gas service, the gas lines will need to be maintained and money for that upkeep will come from residents.

"We try to replace every year one or two of our pipes on our main," said Hebert. "The reason we do that is we know if we defer maintenance...if you don't take care of that, there's going to be a problem. Somebody is going to pay for it and it's going to be you."

According to the mayor, an evaluation done by the city engineering department says 40 percent of the gas system needs to be replaced. Those repairs would cost the city between $15-20 million. It's money the city doesn't have, said Maxwell.

A rate analysis done by CenterPoint shows that for every $1 million that is spent on the city's gas system, residents would be looking at a five-cent increase if the purchase goes through. However, Hebert pointed out, if that same $1 million was spent by the city for repairs and maintenance, residents could see as much as a $1.30 increase.

The city would also save money on the purchase by saving on insurance, said Hebert. "If you have less assets, your premiums go down. The city is going to have less assets. We're going to be responsible for these assets."

CenterPoint has offered Pascagoula $3 million to purchase the gas system. That purchase will also include a franchise free, which is a fee generally paid by privately-owned utilities so that they still have rights within the city, such as right-of-ways. Hebert said the statutory requirement fee is two percent but CenterPoint has offered to pay the city back 3.7 percent of the gross revenues annually.

“This is really a business decision," said Maxwell. "If we're going to keep the city on financial footing, we've got to make some drastic changes."

Gautier gas customers would also be affected by this purchase, however, city officials there say they don’t have any say in the sale or the terms offered.

"The City of Gautier doesn't have anything to do with setting the gas rate," explained Gautier councilman Casey Vaughan. "If the sale is approved, then we would need to work out a contract for the franchise fee with CenterPoint. At this time, (Gautier) city council hasn't had any discussion on it."

The City of Pascagoula has not yet determined when a vote will be made on the sale of the gas services. City officials say they have ordered an independent evaluation separate from the one done by CenterPoint. The results from it are expected to be released this week.

Once that report comes in, Maxwell said the city council will discuss it in an executive session then bring it out for a public discussion. A decision hasn't been made yet about when it will be put to a vote.

To watch the full video from Monday’s meeting, click HERE.

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