Mike D from Raleigh, NC. Duke Energy Carolinas territory. Working on a large textile manufacturing plant. The fuel adjustment clause (FAC) on their bill has been charged at the commercial rate of $0.0187/kWh instead of the industrial rate of $0.0142/kWh. The plant is on the industrial rate schedule OPT-I and has been since 2006. But the FAC line on the bill references the commercial FAC rider. The base energy charges are correct — they are being billed on the industrial schedule. It is just the FAC that is wrong. At 1.2 million kWh/month, the difference between commercial and industrial FAC is $0.0045/kWh times 1.2 million which equals $5,400/month. This has been wrong for at least 3 years that I can verify. Total overcharge: approximately $194,000.
Fuel adjustment clause rate applied to wrong customer class — $18K overcharge
Mike, $194,000 is an extraordinary finding. Fuel adjustment clause misapplication is one of the most overlooked errors in commercial auditing because most auditors focus on the base rate and demand charges and never verify the riders. The FAC is often a separate line item calculated by a different module in the billing system, and it is entirely possible for the base rate to be correct while the FAC references a different customer class. How did you catch it?
Randy, I was comparing the client bill to the tariff sheet line by line. The base energy charge matched OPT-I perfectly. But when I checked the FAC, the per-kWh rate on the bill did not match the OPT-I FAC rider. It matched the commercial GS FAC rider instead. I almost missed it because FAC rates change monthly and I was initially looking at the wrong month tariff sheet. Once I matched the right month, the discrepancy was obvious.
Mike, this is why I tell every new auditor: verify EVERY line on the bill against the tariff, not just the big charges. The FAC on a 1.2 million kWh account is a $22,000/month line item. Getting the rate wrong by half a cent per kWh on that volume is catastrophic. And nobody at the plant was checking because who reads the fuel adjustment clause?
I had a similar FAC misapplication on a FirstEnergy account in Pittsburgh. Steel fabrication plant on an industrial schedule but the FAC was coded to the general service class. The per-kWh difference was smaller — about $0.002 — but on 800,000 kWh/month it was still $1,600/month. Recovered $38,400 over 2 years. FirstEnergy said it was a billing system coding error from when they migrated to a new software platform.
Walt, a software migration error makes sense. Duke had a system upgrade in 2009 and this plant has been on the wrong FAC since then. The base rate migrated correctly but the FAC rider code did not. Three years of $5,400/month because of a data migration glitch.
Mike, what is the Duke Energy lookback for billing errors in North Carolina? If this has been running since 2009, can you recover the full 3+ years?
Phil, NC lookback is 3 years for utility billing errors. I can document the error back to early 2010 based on the bills I have. So 3 years at $5,400/month is $194,400. Duke might argue the customer had an obligation to verify their bills and catch the error sooner, but the FAC is not something a layperson would know to check.
Filed the dispute with full documentation showing the OPT-I tariff FAC rate vs the commercial GS FAC rate applied on each monthly bill for 36 months. Duke reviewed it for 3 weeks and came back with a full acknowledgment. Credit to the account: $197,200. Slightly more than my estimate because I had used rounded FAC rates and the actual monthly rates varied. This is the largest single finding of my career.
$197,200 on a fuel adjustment clause coding error. Mike, this should be a case study for every auditor. The lesson is simple: verify every line, every rider, every surcharge against the applicable tariff. The big money is not always in the obvious places.