Vermont Business Magazine Burlington Electric Department (BED) Interim General Manager Neale Lunderville was joined by Mayor Miro Weinberger today to announce the discovery by BED staff of significant over-billing errors involving two of BED’s large commercial customers, the City of Burlington ($1,779,201) and the University of Vermont ($357,794), as well as an under-billing error involving the ECHO Center. The discovery of these billing issues has led to a complete and thorough review of BED’s metering and billing processes to ensure that the issues are quickly addressed, corrections made, and preventative measures put in place for the future.
“After a preliminary review of the issues, we believe this is a confined problem,” said Lunderville. “However, we have an obligation to our customers to ensure that these are indeed isolated incidents. That is why we have taken the measures to conduct a complete review, with the assistance of outside experts, to examine all aspects of BED billing processes.”
BED already has conducted a review of residential and small commercial accounts, which make up the vast majority of the customers, and BED is pleased to report that no issues were found. BED now is focused on its review of demand meters for large commercial and industrial customers, the area in which the two problems occurred.
“These errors were avoidable and should not have remained undetected for so many years – our customers should not have to worry about the accuracy of their bills,” said Mayor Weinberger. “Once these issues came to light, BED acted quickly and decisively to diagnose the problems, correct the mistakes, initiate a review of all other accounts, and communicate a detailed explanation of the issues to our customers and the public. I appreciate new interim General Manager Lunderville's leadership of this extensive response. I have confidence that our team at BED will resolve these issues and put new systems in place to prevent similar problems in the future. Additionally, I have directed the CAO’s Office to lead a review of all City billing systems and to focus on our invoice processing practices as part of our ongoing, broad effort to improve the City’s internal controls.”
The problems came to light when BED staff investigated what appeared to be irregularities between usage and billing with two accounts: the City street lighting account and the combined UVM Rubenstein Lab and ECHO Center account. BED has met with the impacted customers and agreed on appropriate corrective measures – including reimbursements where appropriate – and implemented additional controls to ensure that the problems are not repeated. Further, BED has hired KPMG to provide independent, third-party assessment of BED billing practices and procedures, and to thoroughly analyze BED’s systems to look for weaknesses and offer recommendations.
“This situation is unfortunate, and there never is a good time to share this type of news,” Lunderville continued. “I want to commend the team at BED and extend my appreciation to the affected customers for their understanding and cooperation as we work to remedy these issues. We are committed to a thorough and transparent review of our processes and will take all steps necessary to help prevent this sort of thing in the future.”
In his memo to the impacted parties, Lunderville wrote in part:
As for the City and the over-charging for street lighting, Lunderville wrote: "Based on our research, the street light billing error has existed since at least 2006, which is the earliest benchmark to compare actual inventory against billed lights. In 2006, the City had 3,245 actual street lights, but BED was billing for 3,549 lights. In June 2014, our actual inventory showed 3,275 lights, but BED was billing for 5,052 lights – a difference of 1,777 lights. The extended timespan of this error, combined with monthly increases as lights were replaced, has resulted in an over-billing by BED to the City of $1,779,201 since 2006.
"BED has met with the City to make payment arrangements for the over-billing. By industry practice, BED looked back six years (i.e., the State statute of limitations) to determine the charges. For the period from July 2008 to June 2014 (six fiscal years), BED will remit $1,464,604 to the City. BED will make this payment from its operating fund reserves and will not seek rate recovery. The payment will not impact customer rates."
As for UVM, he wrote: "At the request of UVM, BED conducted a comprehensive review of its Rubenstein Lab building on the waterfront, part of which the ECHO Center leases from UVM. During that review, BED staff found an error with a billing determinant in the CT meter configuration that led to ECHO being billed for only half of its actual usage with UVM billed for the other half. The net result of this error is an over-collection by BED from UVM of $357,794.
"The billing impact to UVM and ECHO is as follows:
− During the period of 2003-2009, BED sent ECHO’s bill to UVM and the electric bill was settled between the lessor and lessee. During this period, because of the multiplier error, UVM was under-billing ECHO for its usage for a total of $254,662.
− In 2009, BED began to bill UVM Rubenstein Lab and ECHO separately and directly, although still with the sub-meter setup. The multiplier error continued during this period, although it was BED that was now under-billing ECHO and over-billing UVM. From 2009 to the present, because of the multiplier error, BED over-billed UVM by $259,287.
− From January 2009 to April 2014, because of the demand error, BED over-billed UVM by $98,506.
"The total over-billing by BED of UVM is $357,794. We have remitted a check in that amount to UVM. BED made this payment from its operating fund reserves and will not seek rate recovery. The payment will not impact customer rates.
"The University of Vermont is BED’s largest customer. We will continue to partner with them on energy efficiency projects and to provide exceptional service as the campus grows and changes over the coming years.
"We also are working with the ECHO Center to resolve the under-billing and help them move forward. The unfortunate result of this error is that ECHO’s electric bill will double. Our energy efficiency team is working closely with ECHO on possible cost saving measures."
The Public Service Department learned Wednesday evening, September 3, about the issues identified publicly today by Burlington Electric Department related to overbilling the City of Burlington and the University of Vermont. It released the following statement Friday: "It is our understanding that the overbilling of the University of Vermont has been refunded using cash reserves, and that the utility has committed to compensating the City for the error through use of the utility’s cash reserves as well. Critically, in working with BED over the last day, the utility has agreed not to seek recovery of this compensation through rates, and therefore rates to Burlington Electric Department customers will not be affected by these errors."
“While no one ever likes discovering news such as we have from Burlington Electric Department, we appreciate their diligent work to identify and rectify the billing errors in a way that is appropriate and protective of ratepayers,” Public Service Commissioner Christopher Recchia stated. “Our interests in this matter going forward are to ensure that these issues are resolved for the future, and that is why the Department will engage as needed in working with Burlington Electric and KPMG to ensure their billing systems are accurate and that any additional measures needed are in place to keep this from happening again.”
Source: BED, VT PSD. 9.5.2014