How to Audit Utility Bills Step by Step

Auditing a commercial utility bill is a methodical process of comparing what a business was charged against what it should have been charged according to the utility's published tariff. This guide walks through the complete process that professional auditors use.

Before You Start: What You Need

• 24 to 36 months of utility bills for the account being audited
• The utility's current rate schedule (tariff) for the customer's rate classification
• An audit workbook or spreadsheet to organize the data
• Access to the utility's tariff filings (usually available on their website or from the public utility commission)

Step 1: Collect and Organize the Bills

Request copies of all bills for the audit period. Most utilities provide electronic copies through their online portal, or you can request them from customer service. Organize bills chronologically and verify you have every month — gaps in the billing history can hide errors.

For each bill, you will need to extract: billing dates, metered consumption (kWh, therms, or gallons), demand readings (kW), and every line-item charge.

Step 2: Verify the Rate Classification

This is the single most important step. Look at the rate schedule code on the bill (often labeled "Rate," "Tariff," or "Service Classification"). Then pull up the utility's full list of available rate schedules and determine whether this customer is on the optimal rate for their usage pattern.

Key questions to ask:

• Is the customer on a general service rate when they qualify for an industrial or large power rate?
• Would a time-of-use rate produce lower costs given their usage pattern?
• Has the customer's usage changed significantly since the rate was originally assigned?

Step 3: Recalculate Every Charge

Using the tariff rate schedule, independently recalculate every charge on every bill. This means computing:

• Customer charge — fixed monthly amount, should match the tariff exactly
• Energy charge — consumption (kWh) multiplied by the per-kWh rate. For block rates, apply the correct rate to each tier. For time-of-use rates, verify the peak/off-peak allocation.
• Demand charge — billing demand (kW) multiplied by the per-kW rate. Check whether demand ratchet clauses are applied correctly.
• Fuel adjustment — kWh multiplied by the current month's fuel adjustment rate. Verify the correct rate was used.
• Riders and surcharges — each rider has its own rate and calculation basis. Verify each one.
• Taxes — verify the tax rate is correct and applied to the proper base. Some charges may be tax-exempt.

Step 4: Check Demand and Meter Data

Review the demand readings for anomalies. A sudden spike followed by months of ratcheted billing demand is worth investigating — was the spike a real load event, or a meter error? Also verify:

• The meter multiplier (CT ratio) is correct
• Estimated reads were properly trued up
• Meter readings are sequential and make physical sense

Step 5: Analyze Power Factor

If the tariff includes power factor provisions, check whether any penalties were applied correctly. Verify that the power factor reading is accurate, the penalty formula matches the tariff, and the penalty threshold is being applied at the correct level.

Step 6: Review Taxes and Exemptions

Many businesses qualify for tax exemptions they are not receiving. Manufacturing energy use, agricultural operations, and certain nonprofit activities may be exempt from sales tax on utility charges. If the customer qualifies, the retroactive recovery can be substantial.

Step 7: Document Findings

For each error identified, document:

1. Which bill(s) are affected
2. What the charge was
3. What the charge should have been
4. The dollar amount of the overcharge
5. The tariff provision that supports your calculation

Step 8: File for Recovery

Submit your findings to the utility's billing disputes or adjustments department. Include your calculations and tariff references. Most utilities have a formal process for reviewing billing disputes and will issue credits or refunds for verified errors.