Just closed a case with Alabama Power that might interest folks. Client was being charged 'Municipal Tax' on their Birmingham facility at 3% of total bill. Discovered the city ordinance only authorized the tax on residential and small commercial accounts under 50 kW demand. This industrial account was 2,400 kW demand and should have been exempt under Section 4.2 of Ordinance 2015-M-8. Alabama Power refunded 18 months of overcharges totaling $47,230. Always read the fine print on municipal franchise agreements.
Alabama Power 'Municipal Tax' overcharge - $47K recovery
Roy - Nice catch! Georgia Power tried something similar here in Atlanta about 3 years ago with their 'City Service Fee'. They were applying it to all commercial accounts when the franchise agreement clearly excluded manufacturing facilities with continuous operations. Recovered about $23K for a textile plant. The key was showing the account met the 'continuous operations' definition - 24/7 production schedule with load factor above 85%.
Alabama Power has been notorious for this. Had a similar case in Huntsville where they were charging the municipal tax on accounts that were technically outside city limits but still within the franchise territory. The franchise agreement specifically stated the tax only applied to accounts within municipal boundaries. Took 8 months to get them to admit the error and process refunds.
Albert - Was that the Redstone Arsenal case? I heard about utilities trying to charge franchise fees on federal property which is clearly prohibited. Tennessee Valley Authority had similar issues with municipal taxes being applied to federal facilities. The Federal Power Act preempts most local taxation of federal electric service.
Patricia - Not Redstone but similar principle. This was a private manufacturer whose service territory straddled the city line. Alabama Power's billing system automatically applied the municipal tax based on ZIP code rather than actual municipal boundaries. Simple GIS mapping showed half the facility was outside Huntsville city limits. The prorated refund was about $12,000.
Duke Energy Ohio pulled the same stunt in Cincinnati. They started applying franchise fees based on billing address ZIP codes instead of actual service locations. Caught them charging downtown rates (3.5%) to suburban accounts that should have been at 2.1%. The ZIP code method was convenient for them but completely wrong legally. Always verify the actual franchise territory boundaries.
Cecilia makes a great point about ZIP codes vs. actual boundaries. In this Alabama Power case, their own GIS department confirmed the service location was outside Birmingham city limits, but their billing department kept applying the municipal tax anyway. It took escalation to their regulatory affairs group to get it corrected. Always document the exact service address and verify it against official municipal boundary maps.
Idaho Power has similar issues with franchise fees in Boise metro area. Different municipalities have different franchise rates and some industrial accounts span multiple jurisdictions. The key is getting the utility to properly allocate charges based on actual service delivery points rather than just applying one rate to the entire account. Worth the effort when you're talking about multi-megawatt accounts.
Warren - Multi-jurisdiction accounts are the worst. We had an Xcel Energy account that served facilities in three different South Dakota municipalities, each with different franchise fee rates. Xcel was applying the highest rate to the entire account. Proper allocation based on individual meter locations saved the client about $8,000 annually. Required detailed analysis of which meters served which municipal jurisdictions.
PG&E in California has gotten better about franchise fee allocation since their bankruptcy, but still see occasional errors. The California PUC requires utilities to maintain detailed records of franchise fee calculations and make them available for audit. If you're challenging franchise fees in California, always request the supporting documentation under General Order 96-B. Most errors show up in the utility's own calculations.
Dan - PG&E's franchise fee documentation is actually pretty good now compared to other utilities. Just reviewed their methodology for a Fresno client and found they're properly excluding transmission charges from the franchise fee calculation, which many utilities get wrong. The key is understanding whether the franchise agreement applies to 'electric service' broadly or just 'distribution service'. Makes a huge difference on large industrial accounts.