Tony V from Newark, NJ. PSE&G territory for delivery, various REPs for supply. I have been auditing deregulated commercial accounts in New Jersey for about 2 years now and I want to share what I have learned about where errors actually show up. New auditors tend to focus on the supply side — the competitive rate — because that is the sexy part of deregulation. But in my experience, about 70% of the errors I find are on the DELIVERY side, which is still regulated and billed by the utility. The supply contract is usually clean because the REP has a direct financial incentive to bill correctly. The delivery charges are where the same old utility billing errors hide — wrong rate class, meter errors, rider misapplication — plus new errors specific to deregulated billing like incorrect load profiling and capacity tag assignments.
Supply vs delivery charges — where the errors actually hide in deregulated bills
Tony, this is an important observation that a lot of auditors miss. The delivery side of a deregulated bill is essentially the same regulated utility bill minus the generation component. All the same errors we find on bundled bills — rate classification, demand charges, riders — still apply. But there are additional error types unique to deregulation that auditors need to understand. Can you walk through the capacity tag issue?
Sure Randy. In PJM territory (which covers NJ, PA, DE, MD, OH, and others), each commercial customer is assigned a Peak Load Contribution (PLC) tag that represents their share of the system peak demand. This PLC tag determines their capacity obligation — essentially how much generation capacity must be reserved for them. The REP pays for this capacity and passes the cost to the customer. If the PLC tag is wrong — usually because it was calculated from an estimated peak instead of the actual meter data — the customer pays too much or too little for capacity. I have found PLC errors on about 15% of the deregulated accounts I audit.
Tony, PLC tag errors are my bread and butter in western Pennsylvania. The PLC is supposed to be based on the customer metered demand during the PJM system coincident peak hour — typically a hot afternoon in July or August. But the utility does not always use the actual meter data. Sometimes they estimate the PLC based on historical usage or even the rate class average. I had a steel fabrication plant in Pittsburgh whose PLC was set using a Class Average allocation instead of their actual meter data. Their actual demand during the coincident peak was 40% lower than the class average because they run a night shift and were not operating at full capacity during the afternoon peak. Correcting the PLC saved them $28,000/year in capacity charges.
Walt, exactly. The class average vs actual meter data distinction is huge. Customers with load profiles that differ from the average — night shift operations, seasonal businesses, anything with low afternoon demand — are systematically overcharged when the utility uses class average PLCs.
In New England we have a similar concept called ICAP (Installed Capacity) tags. Eversource and National Grid assign ICAP tags that determine capacity costs. Same issue — if the tag is based on estimated or average data instead of actual metered demand during the ISO-NE system peak, the customer pays the wrong amount. I have recovered over $120,000 in ICAP corrections across my client portfolio in Connecticut.
In Illinois the equivalent is the capacity obligation calculated from the ComEd PLC. Same mechanics. I want to add another deregulated error type: the switching/enrollment errors. When a customer switches from the utility default supply to a competitive REP, the switch has to be processed by both the utility and the REP. If the effective date is wrong by even one day, the customer can get double-billed for supply — paying both the utility default rate and the REP contract rate for the overlap period. I see this on about 5% of switches.
Yuri, great point on the switching errors. I have seen the overlap billing too. And the reverse — a gap where neither the utility nor the REP bills for supply during a transition period. The customer gets free electricity for a few days and then a catch-up bill months later.
In Virginia we are partially deregulated — Dominion allows competitive supply for large commercial and industrial but not for small commercial. One error I see frequently is the cost reconciliation between the REP supply charges and the utility billing. The utility meters the usage and sends the data to the REP for billing. If the metered data the REP receives does not match what the utility used for the delivery bill, the customer is paying for two different usage amounts on the same bill — one for supply and one for delivery.
Phil, that supply-delivery usage mismatch is another good one. I check for it by comparing the kWh on the supply portion to the kWh on the delivery portion of every deregulated bill. They should match. On about 8% of bills I review, they do not match — usually by small amounts due to meter data timing, but occasionally by significant amounts due to data transmission errors between the utility and the REP.
This thread is turning into an excellent reference for deregulated market auditing. Tony, would you be willing to write up a checklist of the deregulated-specific error types you look for? I think it would be valuable as a sticky post.
Happy to do that Randy. I will put together a deregulated audit checklist covering PLC/ICAP tags, switching errors, supply-delivery usage mismatches, capacity cost pass-through verification, and the standard delivery-side errors. Give me a couple of weeks.