I've been doing a lot of MLGW commercial pass-through audits lately and seeing some recurring lease language issues that are costing tenants money. Thought I'd share some patterns I'm noticing and get input from others. First major issue is vague definitions of "utility costs" that allow landlords to pass through things like meter deposits, reconnection fees, and even utility company penalties for late payment. Second issue is allocation methods that don't account for different tenant operating hours or seasonal variations. Third is pass-through of capital costs like transformer upgrades that should be landlord responsibility. Anyone else seeing similar patterns with MLGW or other municipal utilities?
MLGW commercial pass-through audits - common lease language problems
Randy, great topic. I'm seeing similar issues with Appalachian Power here in Charleston. The penalty charge pass-through is especially common - landlords getting hit with late fees or power factor penalties and just adding them to tenant CAM charges. I always request 24 months of actual utility bills to identify these one-time or penalty charges that shouldn't be passed through.
The allocation method problems are huge down here with Georgia Power accounts. I had a case where a restaurant tenant with extensive kitchen equipment was being charged the same rate per square foot as office tenants. Their actual load was probably 3x higher but they were getting subsidized under the lease allocation formula. Sometimes being "fair" under the lease actually means being unfair in reality.
Rachel raises a good point about restaurant tenants. Here in New Orleans with Entergy, I see kitchen-heavy tenants either getting subsidized or over-charged depending on the allocation method. The most equitable approach is submetering, but that's rarely practical in existing buildings. Load-based allocation using connected equipment surveys is the next best thing.
Randy, the capital cost pass-through issue is becoming more common as utilities upgrade infrastructure. Xcel Energy has been doing a lot of transformer and service upgrades in Denver, and some landlords try to pass those costs through as "utility charges." These are clearly property improvements that should be landlord responsibility, but tenants often don't realize they're being charged for them.
Scott, exactly. I had an MLGW case where they upgraded the building's transformer and service entrance, about $8,400 in charges. Landlord tried to pass it through over 12 months as "utility improvements." That's a capital expenditure that increases property value - definitely not a pass-through utility cost. Tenant saved $700/month by challenging it.
This thread is hitting all the key issues I see with PSO accounts here in Tulsa. Another problem is landlords passing through estimated bills when actual reads aren't available, then never doing true-up adjustments when actual usage data comes in. I always check for estimated vs actual billing periods.
Ed brings up a great point about estimated billing. Georgia Power sometimes estimates bills for 2-3 months then does catch-up billing. If landlords don't properly adjust tenant allocations based on the true-up, it can create significant over/under charges that compound over time.
I'm saving this thread - it's like a checklist of things to look for in commercial pass-through audits. Here in Phoenix with APS, I'm seeing all these same issues plus some unique ones related to time-of-use rate allocation. The key is getting actual utility bills and understanding the tariff structure, not just accepting the landlord's summary charges.
Carla's point about getting actual bills is crucial. I see too many auditors who just review landlord summaries without looking at the underlying utility bills. Seattle City Light bills have lots of detail that can reveal allocation errors, estimated billing periods, and inappropriate charges being passed through.
David's absolutely right. The actual utility bills tell the real story. MLGW bills show every charge component, payment history, estimated vs actual reads, and service upgrades. You can't do a proper pass-through audit without seeing the source documents. Landlord summaries are often incomplete or misleading.
This is exactly the kind of discussion that makes this forum valuable. I'm just getting into commercial lease audits and seeing all these potential issues laid out helps me know what to look for. The key seems to be questioning everything and getting source documentation rather than accepting landlord representations.
Lloyd nailed it - question everything and get source documents. I've been doing this for years and still find new ways landlords try to pass through inappropriate costs. The patterns Randy outlined are spot-on and apply regardless of which utility territory you're working in.
Great thread Randy. Down here in Jackson with Entergy Mississippi, we see all these same issues plus some unique ones related to storm damage recovery charges. Utilities sometimes add temporary surcharges after major storms, and landlords don't always handle the allocation properly when these charges phase in and out.