Just closed the largest recovery of my career - $312,847 from Nashville Electric Service for improper power factor penalties applied over 18 months. The client is a large manufacturing facility that installed new equipment in 2015, and NES started hitting them with PF penalties under Schedule ID. Problem was, the tariff requires 30-day written notice before penalties can begin, and NES never sent it. They just started billing the penalties automatically when the power factor dropped below 0.90. Took depositions from three NES employees before they finally admitted the notice requirement wasn't being followed systematically. Anyone else dealt with NES on power factor issues?
Record Recovery - NES power factor penalty dispute
Paula that's incredible! We've had similar issues with Dominion Energy here in Richmond on their Schedule 30 industrial tariff. The 30-day notice requirement is pretty standard but utilities love to skip that step. Did you have to go through the Tennessee Regulatory Authority or did NES settle before formal proceedings?
Outstanding recovery Paula! KUB here in Knoxville has been much better about following proper notice procedures, probably because they've been burned on similar cases. What was the client's actual power factor during the penalty period? Were they legitimately below 0.90 or was it a metering issue too?
Bill - we settled before the TRA got involved, which saved everyone time and money. Dale - the client was legitimately running between 0.87-0.89 most months, but that's not the point. The tariff clearly states penalties can only begin after proper written notice, period. NES tried to argue that the tariff schedule itself constitutes notice, but that argument fell apart pretty quickly.
Paula, this is exactly the kind of case that shows why tariff compliance matters as much as technical accuracy. Kentucky Utilities tried the same "tariff is notice" argument with us last year on a demand charge dispute. Did NES change their procedures going forward or just fix your client's account?
Great win Paula! I've been dealing with MLGW here in Memphis on similar procedural issues. These utilities think they can just implement tariff provisions without following their own rules. The key is documenting everything and holding them accountable to their filed tariffs. Did the client end up installing power factor correction equipment?
Oz - NES claimed they were "reviewing procedures" but I doubt anything actually changed. Randy - yes, the client installed capacitor banks right after we started the dispute, so their PF is now consistently above 0.95. The irony is they probably would have done it sooner if NES had sent proper notice in the first place!
Paula, what was your fee structure on a recovery that large? Alabama Power has been pretty good about power factor notices here in Mobile, but I've always wondered about the economics of challenging these penalty charges versus just fixing the PF issue upfront.
Leon - I charged 20% contingency on the recovery, so about $62K total fee. The client was thrilled because they figured the penalties were just part of doing business. The real value was establishing the precedent that NES can't just start billing penalties without proper notice. That protection is worth more than the refund long-term.
The precedent value is huge Paula. We had a similar case with KUB where they were applying late fees without the required 10-day grace period. Once we got them to acknowledge the error, they had to review their entire commercial customer base. Sometimes the procedural violations are more valuable than the technical ones.
Dale's absolutely right about precedent value. Dominion settled a similar case with us rather than risk a formal ruling that would have impacted thousands of customers. Paula, did you have to sign any kind of confidentiality agreement as part of the settlement?