Just discovered a massive issue with Memphis Light Gas & Water's billing proration algorithm. They've been calculating demand charges for non-standard billing periods using a flawed formula that consistently overcharges customers. I've identified $47,000 in overcharges across 8 large commercial accounts over the past 18 months. Their IT department programmed the system to multiply rather than prorate demand charges for extended periods. This affects their entire commercial customer base on Schedule E-4 and above.
MLGW proration algorithm completely wrong - major overcharges discovered
Randy, this is huge if you're right. I've got several MLGW clients and I've always wondered about their billing period adjustments. Can you share more details about the algorithm error? What should the correct proration formula be versus what they're actually doing?
Amir, their system is multiplying demand charges by (actual days / 30) instead of keeping them constant and prorating the energy portion. So a 33-day billing period gets charged 110% of the standard demand rate instead of the correct 100%. I've documented this across multiple rate schedules. MLGW's own tariff clearly states demand charges should remain constant regardless of billing period length.
This could affect thousands of customers. Duke Energy had a similar programming error in the Carolinas back in 2019 that resulted in $2.3 million in refunds. Randy, have you contacted MLGW management directly or are you going straight to the Tennessee Regulatory Authority?
Wayne, I've scheduled a meeting with MLGW's commercial billing director next week. Want to give them a chance to fix this internally before involving regulators. If they're receptive, this could be resolved through their customer appeals process. If not, it's going to the TRA with a formal complaint covering system-wide billing errors.
Randy, make sure to get any agreements in writing. PSE&G made similar promises about fixing billing system errors and then dragged their feet for months. Document everything from day one and set specific timelines for resolution and refunds.
Update from the MLGW meeting: Their IT director confirmed the algorithm error and admitted it's been in place since their 2019 system upgrade. They're estimating the issue affects over 1,200 commercial customers. MLGW has agreed to fix the programming within 60 days and process refunds for the past 24 months. Total exposure could exceed $500,000 system-wide.
Incredible work Randy! This is why our profession exists. How long did it take you to identify the pattern and quantify the impact? I'm going to audit my Tennessee clients' bills for similar issues.
Dale, the initial discovery was luck - noticed an unusually high demand charge on a 34-day bill. Took about 3 weeks of analysis across multiple accounts to confirm the pattern. The key was comparing bills with identical usage but different billing period lengths. MLGW's own historical data made the case for us.
Randy, this is the kind of case study we need more of in the industry. Have you considered presenting this at the next AAUBA conference? The methodology for detecting systematic billing errors could help other auditors identify similar issues with their local utilities.
Evelyn, great suggestion. I'm putting together a detailed case study for the Phoenix conference. MLGW has been very cooperative throughout this process - they deserve credit for acknowledging the error and moving quickly to fix it. Final refund amounts should be available next month.
This is exactly why systematic bill analysis is so important. Consumers Energy here in Michigan had a similar demand charge calculation error that went undetected for years. Randy's discovery methodology should be standard practice for all of us. Excellent detective work!