Making markets work in Somerset

Somerset Mayor Eddie Girdler
Somerset Mayor Eddie Girdler

For two years, the city of Somerset has been selling compressed natural gas to the public for use in automobiles — a move that's drawn praise when anyone's paid attention.

Recently Somerset began selling the public another form of fuel to operate vehicles — gasoline — with wildly different reactions.

"If I was a great guy then how am I a socialist now?" Mayor Ed Girdler wonders.

It's a good question.

Indeed, as Girdler points out, "we've sold lots of products" with no appreciable complaints from free-marketeers. They include water and natural gas for home heating, emergency medical services and sewage treatment.

Somerset has been in the natural gas business since the 1970s, owning and operating 155 miles of pipeline in five counties. It purchases natural gas from 12 Kentucky producers, selling it not only to Somerset residents but well beyond through a connection to an interstate pipeline.

Two years ago, Somerset acquired the equipment to fuel vehicles with compressed natural gas, a product it has used for city-owned vehicles and offered to the public. In fact, Girdler says, the gasoline business is small compared to its natural gas activity.

So, why bother?

Because a wide swath of Somerset's citizens and most local officeholders, as Girlder put it, "don't see any free and open competition," in the gasoline marketplace in Somerset.

For years, there have been complaints that gas prices in the community have been consistently higher than in surrounding markets. City leaders believe that not only is this a burden on local consumers but cuts into revenue from tourists visiting nearby Lake Cumberland who plan trips to fill up elsewhere, bypassing Somerset.

Four years ago, a gasoline storage plant with capacity for 100,000 gallons had shut down and was offered to the city at a bargain price. Buying it allowed the city to control costs by purchasing gasoline when prices are low, storing it and waiting for another dip to refill the huge tanks.

Girdler said that within two years the city had recouped its investment. The city has shared the savings for some time with 11 other entities — public services and non-profits — including the Somerset Independent Schools.

For two years, through many city council meetings and other public forums, Somerset discussed opening its pumps to the public before finally authorizing public sales.

It's a stripped down, simple operation. No advertising, no snacks or beer, nothing but regular gas at a price based on a regional average.

The goal isn't to make money selling gasoline but to be, as Girdler puts it, "a catalyst for competition." It was a sign of success when a private station undercut the city: "The point is to lower prices no matter who sells."

That sounds a lot more like a market-based solution than socialism.