A district court judge says the city of Des Moines it owes utility customers millions of dollars in refunds for what he calls “illegal fees.” Des Moines has been collecting around $13-million a year in franchise fees from customers of Mid-American Energy to cover the costs of such services as trimming trees around power lines.
When Des Moines resident Lisa Kragnes noticed the extra charge on her utility bill in 2004, she decided to challenge it in court. Brad Schroeder represented Kragnes and says Judge Joel Novak found the city collected much more money than it needed.
“They’ve been collecting a five percent fee and the judge said only one-and-a-quarter percent approximately is justified. The remainder is an illegal tax that the city has been charging without the authority to do so,” Schroeder says.
Kragnes says she is comforted by the ruling in the class action case. Kragnes says,”We told them what they were doing was wrong. We told them from the very beginning that it was wrong. Now the judge has said yes you are wrong. So I’m not surprised. I’m very happy.” Schroeder estimates Des Moines owes Mid American Energy customers $43-million in refunds for the period between 2004 and now.
The franchise fee costs the average Des Moines household a little more than $100 each year. City officials say they will appeal the ruling. A 2006 Iowa Supreme Court decision ruled such franchise fees can not exceed a city’s costs to regulate the utility. Governor Culver recently signed a bill into law that allows the fee to be up to 5%, regardless of related costs.