Correct and Collect Inside the Utility Auditing Industry

Vincent DiCeglio worked for the Long Island Lighting (LILCO) company for 24 years as a customer service representative. During that period, he discovered numerous errors on clients’ bills, and felt that consumers could use an outside advocate to obtain refunds. In 1976, he took a leap of faith and created his own utility auditing company, Urac, in Rockville Centre, New York, which analyzed bills and recouped appropriate refunds. "I figured that if I could find mistakes at LILCO, then Con Ed and everyone else must have mistakes," he recalls. As it turns out, he was correct. His and the other utility auditing companies that have sprung up since then have recovered millions of dollars for their customers.

At the time DiCeglio began his business, there were few like it. (His wife, Ellen Bindler, offered some friendly competition and created Utility Check., also in Rockville Centre. Today, they both run Utility Check, and DiCeglio’s son has taken over Urac.) He believes the first utility auditor was National Utility Service (NUS), headquartered in Park Ridge, New Jersey. "They worked differently than I did, requiring payment up front and doing everything through the customer," he explains. Most utility auditing companies charge a percentage of the refund. They do the work of collecting that refund, which can indeed be a lot of work. If the utility company refuses a claim, the next step, in the case of regulated industries, is to take it to the Public Service Commission (PSC), where there is an informal hearing. If that is lost, the next step would be a formal hearing.

Rampant Mistakes

Why are there so many errors in utility billing that an entire industry has sprung up to correct the situation? The potential sources of inaccuracy are many. Meters may be registering incorrectly. Customers may be getting billed under the wrong classification. Estimated bills may be wildly inaccurate. Regarding water bills, Alan Rothchild, president of Vantage Group, a water cost management group in Monroe Township, New Jersey, reports, "On the meter charges, there are a plethora of possible incorrect charges. The meter could be incorrectly installed or incorrectly read. There could be an error in the conversion from flat rate frontage [billing on a flat per-unit basis] to meter, sometimes running in the tens of thousands of dollars." Michael Lockhart, president of American Telephone and Utility Consultants in Manhattan, says that examples of billing errors include "mathematically miscalculated bills; bills on non-existent meters; residential buildings double-billed on both frontage and metered billing simultaneously; overlapping billing periods; wrong meter multipliers; overestimated bills on broken meters; bills calculated using incorrect rates."

Because of the numerous factors that affect utility charges, utility auditing companies are far more equipped than an individual would be to analyze a bill. Stephen Galowitz of UtiliSave in New Rochelle, New York, says they are constantly finding new types of errors, and points to a recent example: "In reviewing the account of a manufacturer in Connecticut we found an issue that didn’t apply to them but did apply to an institution in another state… Even a capable property manager will not find an issue like that because they would never have had the opportunity to look at a bill from a manufacturer in Connecticut."

There are other services that auditing companies provide. Just because a bill has been rectified, doesn’t mean there won’t be problems in the future. Bindler says, "Customers continue to send us bills each year. We’re watching them, so they don’t have to worry. We are continuously finding errors."

Vantage Group does complete cost analyses to save clients money on their water consumption prospectively. By so doing, Rothchild says they can usually save their clients ten to 20 percent a year; they have even had cases where they reduced the bill 30 to 40 percent or more. In the process, they often discover past overcharges which they retrieve, but their focus is on saving money in the future. He adds, "We have become very involved in new technology known as Automatic Meter Reading, where meters can be read remotely over telephone lines. This is useful both as a conservation tool and to monitor the Department of Environmental Protection’s (DEP) billing. It’s valuable as a conservation tool because we can use the meter reading to warn a client of a significant uptrend long before they get a huge bill from the city."

Friends or Foes?

One might expect a lot of tension between the utility companies and the auditing companies; it isn’t necessarily so. Galowitz says, "Occasionally there are people at utility companies who are antagonistic. In the vast majority of cases it is important to maintain good relations–we have to live with them day in and day out. They are not malicious, not intentionally overbilling; rather, there is not adequate staffing, they don’t have the resources to analyze everyone’s bill to be sure they’re on the lowest plan. They don’t object if you’re helping a mutual client."

With regulated utilities, auditors have alternatives. As Bindler says, "Within each company, there are those that work well with us, and some who don’t. For utilities in the five boroughs, we have the option of going to the Public Service Commission. For Long Island, we no longer have that option; Long Island Power Authority (LIPA) is no longer regulated. The only other option is to go to court."

One area where there has been a lot of tension has been water billing. Lockhart explains, "It’s like night and day, dealing with, say, Con Ed versus the New York City Department of Environmental Protection. With a regulated utility, I could resolve things in 30 to 60 days. With the DEP, it could be 60 days to a couple of years. There’s an incentive for Con Ed to issue correct bills and to issue refunds as soon as possible because of refund interest. DEP should have to pay interest; otherwise it has no incentive to fix the billing problems."

DEP has further generated controversy by reducing the period in which a consumer could challenge a water bill from six years to two years. There is considerable opposition to this rule. Rothchild explains,"I don’t feel a two-year limit is appropriate because sometimes mistakes don’t turn up for three or four years. Some errors are so complex that they are not discovered for a long time. That’s one reason we do a full cost analysis." Scott Goldberg of Metropolitan Refunds in Long Beach, New York, who is also an attorney, says, "In terms of the Water Board’s ability to go back two years, our feeling is that it is an unfair policy that only serves to protect the Water Board, giving them the benefit of avoiding the responsibility of errors. Because there is no valid basis for the rule, I question its enforceability. Because it was enacted in July 1999 for bills after that date, it won’t have any effect until July 2001." One of his partners, attorney Jason Bokor, adds, "We believe that when the time comes that someone gets denied an adjustment based on this, there will be legal questions on DEP’s authority to make the rule."

On the Horizon

Michael Lockhart has founded the Coalition for Water Bill Justice, which backed legislation to restore the six-year time period. Although this bill passed both houses of the State Legislature by a total of 201 to one, Governor Pataki vetoed it. Lockhart indicates that there were "some pretty alarming things about the veto." It read, in part, that the State was legally committed to " ‘not alter or limit the rights hereby vested in the authority or the water board to fulfill the terms of any agreement made with or for the benefit of holders of bonds…’ Since this bill would affect the board’s ability to collect water and sewer bills, it could violate this pledge." Lockhart has pointed out to the governor that this bill "does not address the board’s ability to collect bills, but rather pertains to refunds on overcharges–undeserved revenue that has already been collected," and that, "if there were an agreement that allows the DEP to keep money obtained erroneously from customers, it would be illegal and fraudulent." According to Lawrence Schatt, deputy commissioner of the Department of Environmental Protection's Bureau of Customer & Conservation Services, "The regulation makes no change to the period for which an adjustment could be made, only the time frame for submission of an inquiry about either a specific bill or the account in general. We do not believe that customers need two years to identify a problem. To the contrary, we find that within days of the receipt of a bill, customers will call, write or visit one of our offices if they believe there is an error. Once an inquiry has been lodged, the customer has reserved his/her rights for appropriate adjustments, for a period of up to six years." Nevertheless, Lockhart would like to see the bill go before him again.

Deregulation has brought even more attention to utility bills. Galowitz says, "The savings from deregulation, as everyone has been finding, have been vastly overblown…. People who expect the savings to be lots of money have been disappointed." Bindler concurs. "We had California to look at. They deregulated years ago and saw customers paying a lot more. Their bills went up 30 percent."

If this turns out to be the case in New York, people will be requiring the services of utility auditors more than ever.

Ms. Goodman is a freelance writing living in Westchester.

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