Booklet - Page 3
Answers to Your Utility Audit
Questions
Here are answers to some of the most commonly asked questions about utility audits.
- Doesn't a utility audit create more work for the property manager and/or management company?
Yes, in the short run. This is due to the fact that in order to begin a utility audit, Pacific Utility Audit requires copies of the most recent 12 months' utility bills from the association, and signed contracts. Also, if a particular account was previously billed erroneously or a rate schedule change is made, the property manager will have to supply copies of that account's utility bill each month during the contract term. This is in order to calculate the monthly savings for that particular account after our utility audit or to verify that the account is now being billed correctly.
No, in the long run. This is because if money is put into that association's reserve accounts, either through a refund or future utility savings, then that property manager in now able to make the necessary repairs or upgrades that the association needs. This, in turn, reduces the number of complaints that they would otherwise receive due to poor grounds maintenance, obsolete equipment, special assessments, or an increase in the monthly homeowners' dues. Also, the property manager and management company is looked upon with approval and gratitude by the board for introducing them to this service that put money into their reserve accounts at no cost to the association!
Money is put into the
association's reserve account
by a utility audit.
- Don't utility companies provide a utility audit service at no charge?
No! This is the most common misconception about utility audits. The utility companies provide energy audits, not utility audits!
The utility companies will make suggestions to their customers on how they can reduce their consumption of electricity, water, gas, etc. by the following two methods: energy efficient equipment or a change in the usage of their utilities.
Pacific Utility Audit doesn't sell energy efficient equipment or tell clients how, when, or where to use their electricity, water, gas, etc. They simply look at the utility bills and utility meters to find errors or alternative billing methods that would result in a refund/credit to the client or a per unit rate reduction of the utility charges.
In most cases, the utility company field representatives are not even familiar with their own rate schedules or alternative billing methods.
- What happens when you find an error and the utility company or city-operated utility will not issue a refund for the overcharges?
The good news is that errors are found quite frequently and the utility companies or cities agree that they did overcharge the client, and immediately correct the error.
The bad news is that the utility companies or cities will rarely refund the entire overcharge to the client. They will claim that their Rules and Regulations prohibit them from issuing refunds, or that there is a Statute of Limitations with regard to refunds.
Pacific Utility Audit will use their own legal expertise and attorneys to prosecute the utility company or city at no cost to you. Ideally you can receive a full 50 percent of the refund monies, back to the date of the error originally occurred! Pacific Utility Audit will absorb all costs associated with all litigation, no matter how long it takes. (50 percent of the refund is paid to Pacific Utility Audit, Inc.)
$$$
The good news is that utility errors are found
quite frequently.
- I can accept paying 50 percent of any refunds/credits received to the utility audit firm . But the utility audit firm also charges 50 percent of future savings generated from the audit for a specified number of months. What are the "future savings"?
Future savings are defined as the reduction of the cost of any utility expense to the client as a direct result of the utility audit. There are several examples of future savings, listed below:
Telephone - You have been charged for a phantom line - one that doesn't exist. The utility audit company is able to go back past years for refunds or credits and also bill for future savings. The reason they can bill the client for 50% of the future savings is because this charge would have gone on undetected if the utility audit company hadn't found it.
Electric - You have a meter constant that was billed at 60 but should have been 30. This is twice as much electricity as you should have been paying for. This can be corrected for past refunds as well as future savings. (Future bills will be 50 percent less after the error is corrected!)
Water - In a case where you have a multiple dwelling building that has had water service charges based on 60 units but the charges should have been for 50 units, because they were counting the laundry rooms, this can be corrected for past refunds as well as future savings. (the association will be paying $x less per month for water service charges and the utility audit company will bill for 50% of these actual savings)
Sewer - You had been paying sewer fees for a dedicated irrigation meter. The utility audit company could go back for refunds or credits and also eliminate sewer fees in the future, resulting in future savings as well. (Savings based on actual water usage for that account each month during the contract term, multiplied by actual sewer rates in effect - no estimated savings!)
Trash - You were billed refuse or trash fees directly by the utility company or city, usually on your water and sewer bill, and you have been charged for 30 trash bins instead of 23. The utility audit company would correct the error and obtain a refund or credit for you. The future savings comes from the future bills being less, due to the correction of the error.
Another example would be finding an error in calculations, such as a decimal point error. Many times this is an erroneous, single error and can be corrected for a past refund or credit only, since you are no longer paying for this mistake. (no future savings in this example.)
- How are the "future savings" calculated to they can be verified?
In order for the utility audit company to bill clients for the utility expense reductions or "future savings", they simply recalculate the clients utility bills or bills at the old rate schedule versus the actual bills at the new rate schedule. The cost difference is the utility expense savings that the client actually realized for that billing period as a result of the utility audit company's change to their account rate schedules or billing methods. (See below.)
FUTURE SAVINGS INVOICE EXAMPLE
If we changed a client's electric rate schedule from an electric rate 6 to a rate 6L and, as a result, changed their KWH charge from $.06 per kilowatt hour to $.05 per kilowatt hour, the net change in their electric cost would be $.01 per kilowatt hour less. The difference between their old and new electric rates may change over the contract term from one penny to a penny and a half, to 7/8 of a cent, etc., but since we keep updated utility rate schedules on file, we would keep track of the actual cost difference between the two electric rates over the entire billing period and invoice the client for the actual cost difference between the two electric rates based upon their actual kilowatt hour consumption each month. (This data would be obtained from each month's actual electric bill for this client's account during the contract term.)
OLD BILLING: Rate 6
Demand Charge (Summer
Month)
142 KW x $13.87
$1,969.54
Energy Charge - Total KWH
30,000 KWH @ $.06 (1st
30,000) $1,800.00
9,450 KWH @ $.05
(remaining) $
472.50
$4,242.04
NEW BILLING: Rate 6L
Demand Charge
(Summer Month)
142 KW x $13.87
$1,969.54
Energy Charge - Total KWH
30,000 KWH @ $.05 (1st
30,000) $1,500.00
9,450 KWH @ $.04
(remaining) $
378.00
$3,847.54
TOTAL ELECTRIC SAVINGS THIS MONTH:
$ 394.50
Invoice Client (our fee):
$ 197.25
Net Electric
savings this month: $ 197.25
Pacific Utility Audit will attach their analysis to all invoices, and be available for further explanation if necessary.
Alternate rates are
generally
available to you,
but the utility company does not
let you know about them!
Any good business person knows that a reduction of annual expenses increases disposable income, which in turn increases profits or, in the association's case, reserve monies!
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