SOMERSET — Nearly six months after the city of Somerset started selling gasoline to the public in competition with private retailers, the move continues to stir controversy, and the state legislature will soon be asked to wade into the issue.
The city council voted to go into the retail gas business because of a widespread perception that local prices had long been consistently higher than in nearby cities.
"We have been gouged with these gas prices for as long as I can remember," said John Ricky Minton, a council member who pushed for the municipal sales. "I got tired of it."
Some argue that retail gas prices in Somerset have not been significantly higher than in nearby towns in recent years, however.
Never miss a local story.
And state Sen. Chris Girdler, a Republican from Somerset, blasted the city's gas sales as an improper government intrusion on private enterprise. Girdler plans to introduce a bill in the 2015 legislative session that would regulate government competition with private businesses.
Somerset began selling gas to the public in July at a gas station and storage center once operated by a company that had gone out of business. The city had bought the station to use in fueling city vehicles.
Somerset is the only city in the country that sells gas to the public, Mayor Eddie Girdler said.
Minton and Eddie Girdler, who is related to the state senator, said the move came in response to persistent complaints about high gas prices in town.
As the council considered the issue, retailers refused to explain their pricing decisions, other than to say that prices were based on regional competition, Eddie Girdler said.
He said he and others suspected that local retailers merely tracked each other's prices without truly competing. The city council's goal in selling gas was to bring greater competition, Girdler said.
The sales have succeeded in driving down gas prices generally in town, he said.
"We have been able to stabilize prices. The cheaper they (private retailers) go, then the less we sell," he said.
Eddie Girdler said businesses have told him that lower gas prices have brought more customers to town to spend money on other things. He said the city comes up with its gas price by checking prices with about 25 private retailers in a 50-mile radius and averaging those, although it also has to factor in the city's cost for the gas because the program has to pay for itself.
The council didn't go into the retail gas market intending to always have the lowest price, he said.
At midday Dec. 18, gas was seven or eight cents a gallon cheaper at the city's pumps than at major retailers nearby on the busy U.S. 27 commercial strip.
But on Dec. 26, private retailers on U.S. 27 were undercutting the city's price by four or five cents a gallon.
The mayor said he doesn't think the city's gas sales have caused significant problems for other retailers. The city doesn't advertise, sells only 87 octane and doesn't sell other products, such as soft drinks or snacks, which are part of the draw at commercial gas stations, he said.
The city buys its fuel from a local refinery, Continental Refining Co., so the program helps support the jobs there, the mayor said.
Many motorists have welcomed the sales.
The city sold 44,154 gallons of gas through credit-card transactions with retail customers in November — an increase of 5,803 gallons from the first full month of sales in August, according to records released by the city.
Jody Huffman, who lives in northern Pulaski County, said she would buy gas at the city-owned station even if it cost more than at other retailers.
"They gave us cheaper gas prices in Somerset — I'm supporting them," Huffman said as she filled up her SUV.
Larry Johnson, a retired state employee who was filling up his Ford pickup the same day, shared the perception that gas prices in Somerset had traditionally been higher than in other cities.
"This is the best thing they've ever done around here," Johnson said of the municipal station.
Mayor Girdler said he'd be glad to suspend the city's gas sales if private retailers maintain reasonable prices.
Sen. Girdler said it is common for people to think that gas is cheaper somewhere else.
He supplied a chart with information from the website GasBuddy.com — which helps people find cheap gas prices — showing that the average gas price in Somerset from January 2011 through July 2014 was at most only a few cents above that in nearby cities.
Mayor Girdler said he doesn't think the chart is correct because users put in the data, and the comparison could be manipulated by including different information.
Sen. Girdler said he thinks the price comparison is reliable.
However, the real center of the controversy is not gas prices but the principle that government should not interfere with free enterprise, the senator said.
He said it's appropriate for government to provide some services, such as education, and water and sewer service. But competing with private businesses is not the proper role of government, the senator said.
The city council's decision to sell gas creates a slippery slope because people could argue for the government to get involved in selling other necessities, he said.
"Is the government going to open up a shoe store? It sets a very dangerous precedent," Girdler said.
The Kentucky Petroleum Marketers Association, the Kentucky Retail Federation and other private-sector representatives also have questioned the propriety of Somerset's gas sales.
"We don't believe that taxpayer-subsidized entities ... should be in competition with private enterprise,' said Jan Gould, a senior vice president at the Kentucky Retail Federation.
Mayor Girdler said the city spent some money up front on its retail gas operation for credit card readers and a kiosk for the attendant.
But the city doesn't subsidize the sales and pays the same taxes on retail sales as private businesses, the mayor said.
Gould said it's hard to tell whether the city's gas pumps have hurt private retailers because of the general drop in gas prices in Kentucky and nationwide.
Sen. Girdler said he'd heard that the municipal sales had hurt other retailers.
He plans to sponsor a bill in the 2015 legislative session to deal with the issue of competition between government and the private sector.
He said he is working on drafts, but the idea will be to define which things qualify as essential government services. One draft under consideration would require financial studies to justify a decision to step outside those areas, he said, but another would attempt to bar government competition with private businesses.
It's possible that the final version of the bill would seek to end Somerset's gas sales, he said.
Somerset council members didn't put together a business plan to evaluate the return on the investment in the retail gas sales, Sen. Girdler said. They spent taxpayer money based on "hearsay, gossip and emotions."
State Rep. Tommy Turner, another Republican from Pulaski County, said he won't support a bill to end Somerset's retail gas sales. Turner said that he is glad the city began selling gas and that it has helped consumers.
Turner said he doesn't think state lawmakers have the authority to terminate retail gas sales in Somerset that preceded legislation on the issue.
Sen. Girdler said he respects other opinions, but he plans to push ahead.
"This is about free enterprise, capitalism and celebrating entrepreneurs," he said.