Working on a retail lease audit here in Columbia and the tenant's lease specifically states they'll pay "actual utility costs incurred." But I'm finding that Dominion Energy has been estimating the master meter readings for 14 months straight due to access issues. The landlord is passing through estimated costs instead of waiting for actual readings and true-ups. Lease language seems clear that estimates don't qualify as "actual costs." Thoughts?
Lease Says "Actual Costs" But Getting Estimated Bills
Marcus, you're absolutely right about the lease language. Had a similar case with PG&E estimated readings in Sacramento last year. Tenant was paying inflated estimates for 18 months while actual usage was 30% lower. We demanded the landlord wait for actual readings and provide a credit for the overcharges. The key is whether the lease allows for interim estimated payments with later reconciliation, or if it strictly requires actual costs only.
The timing of reconciliation is crucial too. Here with PSE&G in Newark, I've seen cases where estimated bills ran high for months, then the utility issued credits that the landlord "forgot" to pass through to tenants. Make sure you're tracking both the estimated charges AND any subsequent credits or adjustments from the utility company.
David from Seattle here. We deal with this constantly with Seattle City Light's estimated readings during winter months when meters are snow-covered. The key question is: does your lease require monthly payments based on estimates with annual true-up, or does it require payment only after actual costs are determined? The language makes all the difference in your recovery strategy.
Thanks for all the input. The lease has no reconciliation clause - just states tenant pays "actual utility costs as billed by utility company." I'm arguing that estimated bills don't qualify as "actual" costs under the plain language. Landlord is pushing back but I think we have a strong case. The 14 months of estimates total about $23,600 in charges that may not be legitimate.
Marcus, that's solid ground to stand on. Here in Salt Lake with Rocky Mountain Power, we had a similar case where estimated readings were 40% higher than actual usage. The landlord tried to argue that estimates were "actual" bills from the utility, but we countered that the lease required actual consumption costs, not estimated charges. Won that one and got a $31,000 credit for our client.
Connie makes a great point about the consumption vs. charges distinction. Down here in New Orleans with Entergy, I always argue that "actual utility costs" means costs based on actual meter readings, not whatever the utility decides to bill. Estimated readings aren't actual consumption measurements, so any charges based on estimates should be subject to later adjustment when actual readings are available.
Juan's distinction is spot on. Here in San Antonio, CPS Energy estimates can be wildly off, especially for large commercial accounts. I always request 3-5 years of billing history to establish usage patterns and identify periods where estimates don't align with actual consumption trends. This helps quantify the overcharges and strengthens your position in negotiations.
Update: Got the 3-year billing history Angela suggested and found that Dominion's estimates were consistently 25-30% higher than actual readings during comparable periods. Armed with this data, landlord agreed to suspend estimated charge pass-throughs and wait for actual readings. We're also negotiating a credit for the overcharges from the past 14 months. Great advice from everyone!
Excellent outcome, Marcus! This is exactly why detailed billing analysis is so important. Here in Spokane with Avista, I've found that estimated readings are often based on prior year usage patterns that don't account for business changes, equipment upgrades, or seasonal variations. Your case is a perfect example of why "actual costs" language should be interpreted literally in lease agreements.
Marcus, this is a great case study for why lease language matters so much. Here in Memphis, I've seen MLGW estimates run 6-8 months before they get actual readings, especially for hard-to-access meters. If the lease says "actual costs," then estimates shouldn't qualify, period. But check if there's a reconciliation clause that allows for interim estimated payments. That could complicate your argument.