Question Of The Week: Auditing Your Utility Provider Could Net Big Savings

Ordering a utility audit on a facility’s water, sewer, and stormwater bills reveals any overcharges that an organization may be paying.

By Scott Lawrence

When it comes to water and sewer expenses, the authorities billing you for utilities could be making mistakes that you and your staff are unable to spot. In fact, what you may not see could, over a period of years, be costing your organization significant savings.

At my firm, as we review our clients’ utility bills, we often see overcharges on water, sewer, and stormwater costs. Many times, it is less a case of intentional behavior on the part of the vendor and more a case of simple mistakes that can easily be overlooked. Below are just a few real-life examples that any facility executive should take care to avoid.utility audits

Out Of Sight, Out Of Mind

  • A city codes accounts based on the water meter size. Both water and sewer are supposed to share the same code. In the case of one large apartment complex, the city coded the sewer at a higher rate. These codes do not show up on the bill, so the error went undetected.
  • In select cities, a legal charge is included on every water account that is intended to help maintain cleanliness in the streets. What isn’t commonly known is that if a business performs a similar function at its property, the city will exempt the cleanliness charge. Sometimes companies end up paying double for doing their part.
  • One major city allows exemptions for sewer charges for the volume of metered water that does not enter the sewer. However, the city required the paperwork be submitted annually. In this particular instance, the city mailed the expiration notice to the billing address, but accounts payable failed to pass the notice along to the person responsible for re-filing the paperwork. The exemptions lapsed for several years.
  • One major shopping mall retail store agreed to allow the property manager to build a parking structure over a section of the parcel owned by the store. The contract decreed that the property manager would be responsible for any utilities charged to the area of the parcel the parking lot covered. However, no one tracked the changes or the charges, and the store continued to pay the mall’s share of utilities.
  • Certain cities deliver water to businesses just beyond its city limits, within the bounds of the surrounding counties. These businesses are considered to be in the unincorporated area of the county and pay a higher “outside rate” for water. One municipality expanded its town limits to include the unincorporated area where a catering company was located, making it eligible for a lower rate. However, it was not automatically accounted for in the city’s billing system. For years, the business continued to pay based on the higher rate for unincorporated areas.
  • A university carried hundreds of water meters, but was paying for sewer charges on water that fed irrigation only. Water used for general business needs typically ends up going down the sewer and gets treated, and businesses pay sewer charges for that treatment. However, water used in irrigation does not enter the sewer system and does not get treated, thus exempting it from sewer charges. In this case, there was nothing on the bills indicating they should have been exempted.

Explained Away

  • One big box retailer significantly expanded the square footage of its operation at the same time the landlord built out the number of retail units of the shopping mall. The city changed the water metering due to the massive construction. Once the dust settled, the retailer’s water and sewer bills increased significantly, which was attributed to its own growth. What they didn’t know is that the builders had tied all the spaces in the mall to the retailer’s water system. The retailer was paying to provide water and sewer to the entire mall!
  • One town’s billing representative, who was not properly trained, incorrectly set up new accounts. When challenged by their customer, the representative defended the policy, claiming it was how things had always been done. Only after an auditor convinced the rep to check with their boss was the error reversed, as it had to be for every similar account that same individual had set up since they were hired.

Simple Errors? Or Oversights Now Accepted?

  • A national retailer shut down its satellite location for one of its large regional stores, and a transfer of account responsibility notice was sent to the water department. However, it was never sent to the sewer authority, which is a separate entity. Sewer and stormwater continued to be billed as it had been before and accounts payable inadvertently assigned the charges to its main regional store. Unfortunately, it took years for the error to be discovered. The refund came only after getting several parties to participate, including the sewer authority, the new occupant of the satellite location and its landlord.
  • The bill payment vendor for a national retailer began looking into a new charge that had shown up on a city water account. Satisfied with the explanation from the biller that this was due to a rate increase, they noted the conversation and let the charge stand. Every month, when the charge would show up, the vendor would check the notes from their prior call and pay the bill shows presented. A third party auditor analyzing the bills later determined it was a longstanding mistake and was able to get the city to reverse its error and obtain a refund.

There are many costs associated with operating a facility, regardless of its size. The coding and billing structures are often complicated, making it easy for mistakes to go unnoticed. The chances are high that you may be paying too much for your organization’s recurring expenses. The first, and most important, step is to recognize there are third-party experts who can help you shed light on those dark areas of billing that may be going unnoticed.utility audit

Lawrence is a utility auditor working on behalf of SIB Fixed Cost Reduction, which finds savings for companies on their fixed monthly expenses and only bills on the savings they find.

How closely do you track your utility bills? Have you ordered a utility audit, and what were the results? Please share your thoughts and experiences in the Comments section below.