Utility audits Featured

10:08am EDT July 22, 2002
On face value, it seems simple: Every month, you receive a bill from each of the utility companies that service your business. Your bill amounts to the number of units used, whether it be gallons, kilowatts or whatever, multiplied by the unit rate.

But are you getting the best possible price? How can you be sure you were charged the correct amount?

"When we do an audit, we look both forward and backward," says Stuart Phillips, director of customer service for Equitax, a San Jose, Calif.-based utility auditing firm. "We look at usage history for recoverable mistakes, which we find 25 to 30 percent of the time. We also do a forward review of what you are paying on a net cost-per-unit basis. People always say they can get you a better rate, but rate isn't the only thing on your bill."

Items like meter charges, taxes and flow rates may all be included in your final cost. There may also be special charges or complicating factors from sewer districts, lighting districts, flood abatement areas or other assessments.

Phillips says that if they have worked with a particular utility before, they usually know exactly what type of error they will find.

"If there is an error with a provider, it's usually an error throughout the class of service," notes Phillips. "It's not an issue of the size of the user, it's often an issue of the provider."

Refunds can usually be obtained, depending on the particular governing statutes that apply to the utility.

"As long as you can provide the utility with specific documentation, they are typically cooperative, providing you have met the rules and format required," says Phillips. "Some utilities make it difficult and some make it easy."

Mistakes happen

Many businesses can be put on the wrong rate plan from the beginning, particularly if they're in a new building. For example, when a manufacturer has electrical service installed, a provider might put it on the same plan that 99 percent of manufacturers fit into, rather than looking into that business's particular needs.

"They basically plug you in and start billing, but you may have more than one billing option available to you," says Phillips. "Until you do a detailed analysis, you don't know."

Mistakes can also occur in the actual billing process, not just the rates.

"I've seen simple miscalculation errors to the decimal point being in the wrong place and the business paying ten times what they should have been," notes Phillips. "For most errors, you would assume that 50 percent of the time they would favor the utility, and the other 50 percent they would favor you. But from what we've seen, well over 90 percent of all errors are in favor of the utility provider. There is a built in bias of 'If we're going to err, let's err on the side of the utility provider.'"

The audit

Auditing utility bills is not just for large corporations. In fact, smaller users often have a better chance of finding potential savings than larger ones.

"The larger the user, the fewer the billing options, so there is less chance of a mistake," says Phillips. "For large users, both the user and the utility are much more vigilant about making sure the bills are correct."

Refunds have ranged as high as $50,000 for a single user, with annual savings topping out in the same amount. Obviously, not everyone will find that big of an error in their billing, but Phillips says about 70 percent of their audits turn up some savings.

The length of the audit depends on how quickly the auditing firm or person can get the information from the provider. An auditor will request detailed usage measurements broken down by the day or even more frequently. Once the information is obtained, the actual audit can usually be completed in a few days.

"We will look at every single line item on a bill and see if there is a better way to do it," says Phillips. "It might involve changing the rates, or changing all or some of the components. We make sure that at the end of the month the business is paying less per unit than when we started. In some cases, raising the rate may actually result in paying less on the bottom line, because of other factors."

For maximum savings, an audit should be performed every three years. Phillips recommends choosing an auditor who is paid a percentage of the savings actually achieved, because the process is difficult to understand.

Some utilities, especially electric, will do an analysis of your usage patterns and make sure you are on the right rate plan.

"Generally, what determines which tariff we use is the load factor: a measurement of how level the customer's usage is throughout the month," says Tom Ringenbach, manager of business development for American Electric Power, which serves much of the Midwest. "We will check to see what the business might be eligible for and look at their peak demands, delivery voltage and other factors."

Someone from the utility can also tell you how to operate your equipment more effectively.

"AEP will review your operations and suggest how you can improve your energy efficiency," notes Ringenbach. "One example, for a restaurant, the billing is a function of peak demand. If the business owner turns on every piece of equipment simultaneously, it will set a high peak demand. A simple solution is to stagger the startup over a more lengthy period of time. There are things that are more complicated than that, but there are things a customer can do that won't affect their operating efficiency. It won't affect their product, but they can save some energy costs."

For more information, go to www.equitax.com or contact your local utility provider.