Working on a retail lease audit for a client in downtown Indianapolis. The landlord is billing them for electricity pass-through at Indianapolis Power & Light rates plus a 15% administrative fee. Lease says "actual utility costs" but doesn't specify markup limits. IPL commercial rate is G-32 at about $0.087/kWh but tenant is being charged $0.100/kWh. Anyone dealt with similar markup disputes? Indiana law seems vague on this.
IPL pass-through rates way off - landlord claiming 15% markup allowed?
Greg - I've seen this exact issue with MLGW pass-throughs here in Memphis. Most commercial leases I audit have language about "reasonable administrative costs" but 15% is pretty steep. Have you checked if the landlord is on a different rate schedule than what they're passing through? Sometimes they'll bill tenants at small commercial rates when the building qualifies for large commercial pricing.
That markup seems excessive to me. In Ohio, I typically see 3-5% admin fees max. The key question is whether your lease defines "actual costs" - if it does, that 15% markup violates the agreement. I'd request copies of the actual IPL bills to the building and compare line by line. Often find landlords inflating demand charges or using outdated rate schedules.
Thanks Jim and Amir. I did get the master meter bills - landlord is actually on IPL's rate G-41 (large commercial) at $0.079/kWh average. So they're not only adding 15% markup, they're also billing tenant at a higher rate schedule entirely. This could be a $8,000+ overcharge for just last year. Client is thrilled.
Greg, that's a classic bait and switch. We see this with Xcel Energy commercial properties in Minneapolis all the time. Landlord gets volume pricing but bills tenants at small commercial tariffs. Document everything and demand a full reconciliation. In Minnesota, this kind of misrepresentation can trigger treble damages under consumer protection laws.
Similar situation with PG&E here in Fresno. Found a shopping center landlord charging tenants Schedule A-6 rates ($0.13/kWh) when the building was actually on A-10 medium commercial at $0.095/kWh. The 15% "admin fee" was just icing on the cake. Recovered $23,000 for my restaurant client over 3 years.
Update: Client's attorney sent demand letter with our audit findings. Landlord agreed to refund $11,200 and cap future admin fees at 5%. Sometimes you just have to show them the numbers. Thanks everyone for the advice!
Nice work Greg! That's exactly why these audits are so valuable. Most landlords don't realize their billing practices violate the lease terms until you spell it out for them. 5% admin fee is much more reasonable for actual costs of meter reading and billing.