Found something weird on a ComEd bill in suburban Chicago. The franchise fee is being calculated on demand charges only, not on the total bill. Every other ComEd account I've seen applies the franchise fee to total charges. This client's bill shows a 1.4% franchise fee on the demand charge line but zero franchise fee on energy charges. The franchise agreement for this municipality is supposed to be 3% on total revenue. Is the utility underbilling the franchise fee, or is there some special provision I'm not aware of?
Client billed franchise fee on demand charges only — not total revenue
That's unusual. ComEd typically applies municipal franchise fees as a percentage of total charges. It's possible the municipality has a non-standard franchise agreement that specifies application to certain charge types only. More likely, it's a billing system error where the fee was only mapped to the demand charge line item when the account was set up. I'd pull the franchise agreement from the municipality and compare. If the agreement says 3% on total revenue and the bill is showing 1.4% on demand only, the client is actually being underbilled. Which means you can't claim a refund — but it's still worth flagging to the client as a risk. If the utility catches it later they could backbill.
This is a good example of why we check franchise fees in both directions. An underbilling is not something you can recover on, but it's something you should report to the client so they're not surprised by a correction later. It also demonstrates diligence — telling a client you found an error in their favor builds trust because it shows you're thorough and honest. In terms of the audit, document the discrepancy, note that the franchise agreement specifies 3% on total revenue, and recommend the client proactively contact the utility to get it corrected rather than wait for a backbill.
Pulled the franchise agreement and confirmed it says 3% on gross revenues from sale of electricity. So this is an underbilling. Flagged it in my report as a risk item. Client appreciated the heads-up — said it made them trust the rest of my findings even more because I wasn't just looking for refunds.