By Tom Ranallo, President, Troy & Banks, Inc.
Escalating utility costs – electric, gas, and telecom – are a bane for both large and small food and beverage processing facilities. In 2021, the national average cost of commercial electricity rates were approximately 7.26 U.S. cents per kilowatt-hour (KWh). As of January 2023, the average cost rose to 15.47 cents per KWh. Electric and gas rates vary from state to state, and supply, demand, and other market-driven fluctuations affect rate variations and adjustments as well.
A frequently overlooked factor contributing to higher energy costs are incorrectly calculated utility bills. The COVID-19 pandemic has led to an alarming increase in the number of errors and miscalculations due to a combination of layoffs, worker shortages, downsizing, absenteeism, and unplanned work stoppages.
Despite the possibility of being overbilled, processing supervisors and overseers must ensure they have adequate amounts of electricity, natural gas, steam supply, water supply, and refrigeration to keep plant operations running efficiently.
Energy costs are a significant annual outflow that accounts for over 18%-20% of food and beverage processing expenditures. That may include mistakes on billing for telecom: internet, cable, data, landline, wireless, and cellular. Included as well are additional fuel and energy supplies: petroleum, diesel, coal, ethanol, and propane.
To be certain that your energy and utility bills are accurate requires knowledgeable and experienced personnel who are trained to analyze complex and multifaceted invoice components. Industry-wide research has shown that an astounding 75% or more of utility and telecom invoices contain ongoing and overlooked errors.
Utility providers have no internal error-detecting procedures, nor are they required by regulations or protocols to review, track, or identify billing inaccuracies. That leaves the responsibility of identifying billing errors to the companies that may or may not have the in-house expertise to identify such errors.
Too many companies rely solely on the uniformity of monthly bills to determine their accuracy. That is to say, if a current bill is comparable to a previous month’s bill, the assumption is made that the current bill has been correctly calculated. That is not a practical or conclusive criterion to determine the accuracy of utility bills.
Inaccuracies that can and do occur on a regular basis are not the result of unprincipled or dishonest efforts on the part of your providers. They are the result of flawed data loading, misread meters, malfunctioning meters, misclassified rate categorization, fluctuating load, and power factors, demand charges, variable utility franchise fees, tariffs, taxes, delivery fees, and other fixed charges.
There are expert auditing refund companies available to take the concern out of utility bill accuracy. These companies perform an in-depth analysis of all of your utility, energy, and telecom bills probing for miscalculations, oversights, and other errors.
Several work on a contingency fee basis with zero front-end costs, some work on an hourly charge basis, and others work on a turnkey project basis. Some also provide energy supply consulting, telecom procurement consulting, and energy efficiency consulting.
Based on the location(s) of your operations, utility reviews can analyze up to six years of retroactive billing histories. That timeline is based upon the statute of limitations set within your state. The attainment of those bills is made available by the utility companies themselves, upon receiving a Letter of Authorization (LOA) from the auditing company representing your concern.
The amount of time required from you or your staff is kept to an absolute minimum. Beyond providing the first page of the accounts to be examined via email, fax, or snail mail, the only other time requirement will be providing you with ongoing updates and status reports during the auditing process.
Because of the significant energy consumption of all food and beverage processing facilities, it is prudent for processing plants, administrative offices, and other facilities to take advantage of a utility audit every five to seven years.
Making sure your utility bills are correct should indeed be a prime focus for proper operational cost oversight. Over time, ongoing billing errors may directly result in the forfeiture of substantial revenue that can be identified and corrected with overpayments secured and recovered.
There are documented instances where years-long miscalculations have exceeded $3 million dollars in recoveries based on overestimated billing criteria.
Discussing this matter with an experienced utility auditing company representative will certainly be worth your while. The time required for an in-depth audit will be based on the size of your business and the number of accounts to be analyzed. A comprehensive audit may likely produce some unexpected financial recoveries and generate the potential for substantial future savings. That is something well worth taking into consideration.
