Defending Against Underbillings

Posted on: June 18, 2014         Share This:

Besides being very capable of overbilling customers, gas, water, and electricity utilities are also capable of underbilling customers. If a utility finds that an underbilling error has been made and depending upon the timing and size of the error, utilities have been known to go back to the customer and demand payment for the underbilled amount. Yes, they must be conservative in their estimates but the amounts owed can be significant. Errors are often caused by internal meter element failures which can be calculated or estimated depending on the nature of the meter element involved.

Regardless, there are two factors which suggest that utilities are NOT entitled to ANY compensation subsequent to discovering the error. The first is the business issue that a customer cannot go back and resell their products over the period of time that the underbilling error occurred. This issue was underlined about twenty years ago when Kenora Hydro took Vacationland Dairy to the Superior Court to collect for a metering error. The judge ruled that Vacationland Dairy did not have to pay Kenora Hydro because the they could not go back in time and resell its milk and ice cream for more money that would cover its costs on order to settle up for the error.

Today, the second and even more compelling regulatory reason for electricity utilities is that they are required to claim a loss adjustment based on the difference between the electricity they purchase and the amount they actually sell to customers. Most of the difference is due to transporting electricity, and making it available at the customers’ voltage.The result is that some electricity is lost as heat. However, any metering errors are also included in this line loss adjustment. Further, utilities are required to file their rates on a regular basis with the Ontario Energy Board which include their latest loss adjustment calculations, thereby making themselves whole for any lost electricity caused by metering errors. If a utility were to collect from the specific customer in addition to making up the loss adjustment via a regulatory process, it would indeed be collecting twice, once from the affected customer and twice from the general customer base.

Part of Utility Advocates’ role is to “Defend” its clients. Handling underbillings is one of the ways we accomplish this.

Wayne Taggart