Believe it or not, the vast majority of associations and businesses pay their utility bills largely by guesswork. Since these services are essential to operations, most people pay the utility bills without question. In so doing, you are probably paying considerably more than you should! This fiscal carelessness stems for three misconceptions:
Misconception No. 1 – State public service commissions establish utility rates and compel the utility companies to see that the customers receive the lowest rate – and that such action is enforced.
The fact is that for all practical purposes, utilities actually establish their own rates. State public commissions recognize the fact that the initiative for making and changing rates lies with the utilities themselves. Utility companies are subject to varying degrees of regulation in most states. However, in actual practice the interpretation and application of rates by utility companies are given broad latitude and vary greatly. State public service commissions are fundamentally concerned with the overall picture of rates, and then only with respect to the total annual revenue yielded by a utility company. Most state commissions declare that their policies regarding rates are as follows: “This commission does not require that utility companies guarantee to commercial or domestic or industrial consumers the lowest available rates for a given operation. When two or more rate schedules or types of service are available, it the the customer who must make the final decision as to which type of service they desire. If the customer guesses wrong as to which rate schedule or what type of service will be most economical, the utility company cannot be required to reimburse them for their mistake.”
Misconception No. 2 – The Federal Power Commission exercises direct authority over utility rates.
The fact is that the Federal Power Commission has no control over your local utility rates. The Public Utility Act of 1935 gave the Federal Power Commission regulatory powers over interstate wholesale rates of electric utilities. The Natural Gas Act of 1938 broadened regulations by the Federal Power Commission to include transportation and sale of natural gas in interstate commerce. Sounds good, doesn’t it? However, you do not buy your utility services on an interstate basis! Therefore, the Federal Power Commission has no jurisdiction over your utility rates!
Misconception No. 3 – Utility companies automatically give the customers the best rate obtainable.
The truth of the matter is that the utility companies themselves state the selection of rates is the customer’s responsibility. Since the full facts are often not available to the customer, the selection of the lowest rate is commonly a matter of guesswork for anyone but the analysts! A utility company may have as many as a dozen to a hundred rates available, and many utility companies are serving hundreds of thousands or even millions of customers. This is particularly true in the electric industry, whenever there are new uses for electricity. With the advent of each new use, such as solar-powered electricity, the utility company creates new rates especially designed to encourage and promote that use.
With the advent of new rates, optional rates, special class rates, etc. the utility companies are quick to point out that they are serving so many customers that is is impossible for them to ensure that each customer is on the best rate available. Basically, your utility companies do not guarantee their customers the lowest or best rates available!
What can you do about it?
If you have been shocked by the knowledge that the responsibility for the selection of all of your utility rates lies squarely on your shoulders, then maybe you should do something about it!
The best answer to the problem of a technical audit and the correct selection of your utility rates lies on the availability of competent, professional utility rate consultants who specialize in this field! After all, would you perform your own surgery, represent yourself in court, or repair your own automobile without the knowledge and experience required in each of these areas? A utility audit is no different!
The good news is that it costs nothing up front, and any utility refunds or savings is split with the utility auditor.
Considering that utility expenses continue to increase, and many times rank as the top three budget expense category, a utility audit should be standard best business practice for any association or business! So…. stop throwing money away each year on utility bills!!!