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Memorandum June 19, 2008 In contrast, the gross revenue fees can turn an initially supportive customer into a vocal opponent when a spike in the fee occurs later in the collection period. 4. It is not subject to a decrease in revenue. Neither the source of the gas or electricity nor the utilities revenues in the city affect the amount of the meter fee revenue collection. 5. Large businesses will likely be less opposed to a meter -based franchise fee than to a gross revenue fee, depending on the formula of course. Cons: 1. Because this is a fixed fee, it does not change based on customer usage. Persons who go south during the winter or who have strong conservation priorities do not pay lower franchise fees under this design. Thus, adding to the franchise fee unpopularity generally may be an objection from environmentally - conscious residents. The counter to this conservation- related objection is similar to the counter regarding gross revenues above. The amount of money to be saved on a month -to -month basis through conservation is minimal. 2. The utility will propose the formula among the customer classes because it provides the city with the sample runs of revenue generated from various formulas. The meter fee will inevitably favor the large businesses. The city is free to counter with its own proposal, but meter fee formulas will never capture more than a few hundred dollars a month from a large business, whereas a percent of gross revenue applied in a high usage month could be in the thousands in fees. Usage -Based Fee This is the least common fee of the three, but has some interesting characteristics. Utilities do not favor it because of the administrative hassle they claim it creates. Pros: 1. Unlike the gross revenue fee that will increase with a commodity price, beyond the control of the consumer or utility, the city and utility can agree on a BTU or KWh formula for the fee. So the commodity price will not vary for the franchise fee even though it varies for the remainder of the customer's bill. This makes it a pure usage -based fee that does reward conservation. 335300v1 JMS LN140 -105