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Gas department raises concern over 17.5% inspection overrun, proposes customer credits to expand service
Summary
Fairhope's gas department asked the council to remove two agenda items after a contractor invoice showed about $175,832 in inspection overages (a 17.5% increase over the original price). Department staff also proposed a customer-credit program to attract new customers and discussed recent safety and audit updates.
Wes, representing Fairhope's gas department, told the work session that two agenda items (12 and 13) were being removed so the council could consider them later after more investigation. Item 13 involved a $175,832 invoice that Wes said represented approximately a 17.5 percent increase over the original contract price; department staff said the overrun was driven by inspection fees tied to extended project timelines, not construction costs.
Wes asked the council to consider tabling the payment and to let staff investigate. "Everything that happens in the gas department is my fault," he said, adding that the department had reviewed invoices to confirm billed work was completed. An unnamed councilmember pressed the point: "That seems like a lot," referring to the 17.5 percent increase. Council members agreed to remove the two items from the agenda and requested further investigation before authorizing payment.
Wes explained the contract structure to the council: the contract included a "not to exceed" provision and an escalator clause, but the escalator in the contract would only allow modest increases (the department referenced a 3 percent cap in portions of the contract). Council members said they would weigh whether to pay the overage and whether to continue using the contractor; one said the council should consider whether it wants to hire the vendor again.
The gas department also presented a proposal to make its service more competitive in areas where investor-owned utilities and neighboring municipal systems offer incentives. Staff described a potential customer credit system tied to appliances: a $100 credit for a major, year-round appliance (examples cited included water heaters, stoves, furnaces) and $50 for smaller or seasonal installations. Wesley (Wes) and staff discussed verification procedures and recommended final-inspection verification before any credit is applied to an account. "We only offer this in an area that's competitive," Wes said, noting the program would be designed to be equitable for homeowners and the city.
Council members and staff discussed implementation challenges: credits versus rebates, how to verify that appliances are actually installed (rough-in inspections can be gamed; final inspection and evidence were recommended), and how credits would apply in subdivisions where developers, not owners, might initially control connections. Staff noted meter-deposit and service-fee arrangements in the existing ordinance (currently a $300 service fee and $100 meter deposit) and preferred front-end credits applied to accounts over post-hoc rebates for administrative simplicity.
Other gas-department updates included installation of a new odorizer at the gate station as a safety improvement and notice of a federal audit of the department scheduled for May 14--15. Staff said the odorizer is installed and operational and that the department is prepared for the federal audit.
Action taken: council members agreed by consensus to strike agenda items 12 and 13 from the current agenda and directed staff to investigate the invoice overrun and return with findings before any payment is approved.
