If you’re running a business or in charge of accounts payable, then you know energy can be a significant line item on your profit and loss statement. Now, while most of us are focused on labor costs, insurance, and costs of goods sold, electricity and natural gas bills are often overlooked and simply just paid. This article outlines some of the hidden charges found on utility invoices, how to identify them, and what to do if you find a hidden charge.
How Hidden Charges Happen
There are several ways that hidden charges can occur in your business utility bills. If you are a customer located in a deregulated state then you have two parts to your utility bill and hidden charges can occur in both sections. Let’s look at each part of the utility bill individually:
Supplier Charges
Hidden charges appear on the energy supply portion of your bill when you have a problem with an energy supplier. Typically, customers enter into retail supply energy contracts with suppliers that detail certain terms, prices, and contract lengths. If your energy rate does not match that on your energy contract, then you have an issue. Unforeseen charges from energy suppliers can occur when the supplier passes through additional energy costs above and beyond your energy rate, the supplier bills you the wrong rate mistakenly, or your fixed-rate contract expired and you are now being billed an index, variable rate.
Utility Charges
Utility costs, on the other hand, are for the delivery portion of your electricity bill. These charges are often calculated using a local utility tariff schedule and errors can be identified through a utility bill audit. Some of these hidden charges can occur from the wrong rate schedule, incorrect sales tax, meter read errors, or simple billing calculations.
How To Uncover Hidden Utility Charges
If your utility bills are a significant expense item for your business, then setting aside some time each month to review your utility costs could prove to be well worth the exercise. Here are some things to review on your utility bills each month and how to uncover hidden charges:
Total Supply Rate
A quick calculation each month to determine your total electricity and/or natural gas supply rate can help to ensure that you are being billed correctly from your supplier. Simply take the total supply costs on your energy bill (less any sales tax) and divide it by your total electric kWh or natural gas CCF. Your total rate for energy should match the rate on your energy contract, unless you are in some sort of hybrid product, like a block + index or index price.
Energy Consumption
Checking your total energy consumption each month and comparing it to the same period for the previous year is a quick way to eyeball potential meter reading errors. As long as your operations have remained consistent, your energy consumption should be close to the consumption for the same month last year. If your usage is much higher then you could have a meter error. It is best to contact your utility company if you think this has happened and they can send a technician to check your meter readings.
Sales Tax
In some states, energy bills are fully or partially exempt from sales tax. In Pennsylvania, for example, manufacturers are exempt from paying sales tax on energy that is used in the manufacturing process. An engineering study is required to determine this amount of energy, however, when completed can save businesses lots of money in sales taxes. If you live in a state that offers sales tax exemptions for your industry, you should inquire as to how you can go about applying for the exemption.
Think You Have Been Overcharged?
In conclusion, discovering hidden charges on your business utility bills is doable, but can also seem complex if you are not a utility bill expert. Using a utility auditing company to do this for you could pay dividends in energy cost savings. If you think you’ve been overcharged on your utility bills in the past, contact our team today. We can conduct a utility audit and generate a report on all billing statements and potential hidden charges.
