BY LEESHA FAULKNER

Daily Journal

TUPELO - For nearly 10 years the city of Tupelo has missed a chunk of revenue from a 2 percent franchise fee paid by Tombigbee Electric Power Association.

The city estimates the cost to its coffers at $100,000-$150,000 per year. Over a decade, that's at least $1 million.

Chief Financial Officer Daphne Holcombe, however, said the city isn't sure that's all Tombigbee Power owes because it can't get accounting records to verify the customers the power association serves within the city limits.

"We've requested this information," she said. "But we haven't been given a complete list of all its customers within the city. We have nothing to go by to check on it."

Now, the city wants to take the matter to court. The City Council hired the Oxford law firm of Mayo and Mallette PLLC to represent Tupelo in the legal fight, and on Tuesday,l voted to sue Tombigbee Electric Power Association to get the overdue fees due.

There's some history behind this. Tupelo Water & Light provides electric power service to the portion of the city incorporated before 1987. Tombigbee Electric Power Association provides electricity to the area incorporated into the city since 1987.

State law says that Tombigbee Electric must pay a franchise fee of 2 percent of all gross revenues derived from sales to residential and commercial customers located in the corporate limits of the city. Industrial customers are exempt.

Classifications at issue

However, Bill Long, general manager of Tombigbee EPA, stressed that the utility doesn't classify its customers as industrial. Its rates, he said, are based on physical size of a load. "It's just a general power rate."

Tombigbee EPA is a Tennessee Valley Authority distributor of electric power. So is TW&L. All of TVA's distributors, according to Deas Engineering, use the same rate formats.

But the law requires Tombigbee EPA to pay franchise fees to the city for sales inside the corporate limits to residential and commercial customers, according to Deas' analysis, and "a definition of commercial customer must be established."

Here's why it's important to Tupelo:

Barnes Crossing developments make up a giant portion of the area incorporated into Tupelo since 1987. Holcombe began to notice the development in the area but the reimbursement from Tombigbee Electric never went up.

"The street lights," she said. "We began paying more to Tombigbee Electric for the street lights out there at the mall than they were paying in franchise tax. Something was wrong."

Even as early as 2002, Guy Mitchell III, the city's attorney, requested an attorney general's opinion as to which customers should be included in figuring Tombigbee's 2 percent franchise fee.

The official opinion said: "We are of the opinion that all electricity sold in the municipality by Tombigbee Electric must be included in the calculation of gross revenues."

Based on that, Tombigbee should pay about $168,000 in franchise fees to the city. The utility paid $94,523 in franchise fees during fiscal 2004, which ended Sept. 30, according to city records.

Deas seeks answers

In June 2003, the city hired Deas Engineering P.A. of Starkville to analyze the fees paid by Tombigbee EPA to the city to determine if Tombigbee was paying enough. The city provided a list of customers inside the city limits and served by Tombigbee EPA, showing revenue billed by the power association over 13 months. The list ultimately came from Tombigbee EPA.

"We've given them everything they've asked for," Long said. "I don't know anything that they've asked for that we've not given them."

A spot check by Deas Engineering showed at least eight customers weren't on the list: The Home Depot, Cracker Barrel; Lowes Home Center; Wendy's on North Gloster; Malco Tupelo Commons; Chili's; TVA; and Culp Inc.

Then, the city requested a 13-month data revenue list for those customers. Tombigbee Electric supplied that list.

As part of an explanation, Long sent to Mayor Larry Otis a letter dated Aug. 29, 2003, saying that Tombigbee EPA calculated its franchise fees based on sales to residential and commercial in classes based upon the peak demand in kilowatts used by customers.

The calculation used by Tombigbee EPA as outlined in Long's letter to Otis omits revenue from sales to general service customers with power demands more than 50 kilowatts.

When asked Thursday about the rates and why Cracker Barrel, Lowes and the others might have been left out, Long said because they consumed power "beyond a use level that was excluded from tax calculation" in a contract with the city.

This is a method, according to Long, that was used for years to calculate the utility's fee.

Contact Leesha Faulkner at 678-1590 or leesha.faulkner@djournal.com

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