That Contingency Bill Audit is NOT Free

At Energy Tariff Experts, we do a fair number of utility bill audits. Most of the time, we offer our services through energy brokers/consultants and efficiency firms, but sometimes we send proposals directly to the end user. We often find ourselves competing with contingency bill audit firms and have found that many end users do not understand the true cost associated with contingency bill audits where payment is based on a percentage of the "savings".

The vast majority of "savings" found through bill audits deal with sales taxes billed to exempt accounts. In deregulated markets where energy suppliers may change every few years, provision of the sales tax exemption paperwork is often overlooked during the contracting process. Turnover in accounting and procurement departments at end user firms is another cause of missed sales tax exemptions.

After sales taxes, utility or supplier billing errors are the next most common source of errors. Despite what some vendors may tell you, over 99% of utility bills are correct. Typically, utility bill errors are associated with certain triggers such as estimated meter reads, meter replacement, changes in meter multipliers, or changes to the IT in a utility's billing system. Any bill that is calculated manually (e.g., virtual net metering credits, special contacts, etc.) has a much higher probability of having an error. For competitive suppliers, there are similar flags such as contract renewals for many accounts and complex pass-through charges. We've observed that many contingency bill audit firms do not understand competitive energy market structures well enough to vet pass-through charges. 

There are often additional opportunities for savings that many bill audit firms miss entirely. Oftentimes an account where usage has changed significantly (either up or down) may be eligible for a rate change. This often requires a detailed review of historical billings, tariff rules and procedures, and data analysis. Some utilities will have a myriad of optional rates (think California IOUs) or rates with a baseline and real time prices to allow for economic demand response within the regulated utility tariff structure (e.g., Georgia Power). A highly thorough bill audit should analyze these opportunities if they exist.

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When it comes to recovering sales taxes paid in error, each state is different in terms of the sales tax recovery process. In some states, the "Vendor of Record" (e.g., utility or competitive supplier) will handle the interface with the taxing authorities if presented with the correct paperwork and documentation of refund due. Those are the easy states. In other states, the end user must fill out the forms required to claim a refund and and they must be signed by a corporate signatory. In addition, a predominant use study may have to be conducted or updated in order to justify the exemption percentage. In our experience, customer education and guidance through this process is critical and we feel that the end user must fully understand any document that they will sign and submit to taxing authorities.

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Many end users struggle to understand what they will pay a contingency bill audit provider. They may be quoted a percentage of the "savings" (often 30-40%), but the methodology for calculating "savings" may be opaque (on purpose). In addition, "savings" can be defined as avoided spend over a period of up to two or three years. If there is a five or six figure sales tax recovery opportunity, the contingency bill audit will start to seem rather expensive. 

At Energy Tariff Experts, we do bill audits on a fixed fee basis or a discounted fee with a clearly defined bonus if certain straightforward targets are met. As an end user, if you think that you have billing issues, you probably do. We've had many experiences where we've delivered over six figures in recoveries or reduced future spend for clients where our fees have totaled only a few thousand dollars. The sales pitch for contingency bill audit firms tends to resonate with highly budget conscious consumers, but we'd advise anyone worried about a budget to spend some money upfront on a thorough audit with a detailed report/presentation as a deliverable instead of handing over a five or six figure payout to a contingency firm that found some low-hanging fruit. An educated consumer is a better consumer and the Energy Tariff Experts bill audit process is designed to ensure that the customer is fully educated on every step of the process and that all the savings end up where they belong, in the customer's pocket.