Need some advice on a major billing dispute with Kentucky Utilities. I've got a 180-unit apartment complex in Lexington that's been master-metered for over 15 years. KU just hit us with an $89,000 back-billing adjustment claiming we should have been on a commercial rate instead of residential master meter rate. They're saying the complex doesn't qualify for Schedule RM (residential master meter) because some units are rented to students. This is the first time anyone has mentioned this restriction and the property has been on RM since 2006. The monthly bills went from $12,000 to $18,500 under the commercial rate. Has anyone dealt with similar student housing classification issues?
KU apartment complex overcharge - $89k back billing dispute
Mike, that sounds like BS to me. I've been dealing with LG&E and KU for 20+ years and student rentals have always qualified for residential master meter rates as long as they're legitimate apartment units. The key is whether the units are individual dwelling units with separate leases, not who lives in them. Do you have documentation showing the property was approved for RM rate when it was first connected? That would be strong evidence that the classification was correct. $89k is way too much to just roll over on.
Mike, this smells like a cash grab by KU. We've seen Alabama Power try similar tactics with properties near colleges. The definition of 'residential' is based on the type of occupancy, not the tenant demographics. Student apartments are still residential use. I'd demand to see the specific tariff language they're citing and when that language was added. If it's a recent change, they can't apply it retroactively. Also check if there were any property improvements or additions that might have triggered a review.
Jack and Val are right - this sounds like KU fishing for extra revenue. Here in Nashville, we've had TVA-served apartments with student tenants on residential rates for decades. The classification should be based on the building type and use, not the occupants. Mike, you need to file a formal complaint with the Kentucky PSC immediately. The back-billing period alone is questionable - most states limit utility back-billing to 12 months unless there's fraud involved. Did KU provide any explanation for why they're going back 15 years?
Thanks everyone. KU claims they 'discovered' the issue during a routine audit but won't specify what triggered it. The original connection documents from 2006 clearly show RM rate approval. They're trying to reclassify it as 'commercial multifamily' which doesn't even exist in their tariff book. I think they're making up rules as they go. Filed with the PSC yesterday and hired a utility attorney. The property owner is freaking out about the $89k but we're going to fight it. Will keep you posted.
Mike, good for you on hiring an attorney. We had a similar situation with OG&E in Oklahoma City where they tried to reclassify a senior living complex as commercial instead of residential. Turned out some account clerk flagged it during a system conversion and nobody bothered to check the actual tariff definitions. Cost us $15k in legal fees but we got the whole thing thrown out. Document every communication with KU and don't accept any payment plans until the dispute is resolved.
Mike, this reminds me of a PECO case we had in Philly a few years back. They tried to reclassify student housing as commercial based on some obscure interpretation of 'transient occupancy.' We won by showing that the apartments had individual leases, separate kitchens, and met all the criteria for residential use under the PA code. The fact that tenants were students was irrelevant. Make sure your attorney pulls the PSC precedents on residential classification - there should be plenty of favorable decisions.
The back-billing amount seems excessive even if there was a legitimate rate classification error. Most PSCs limit back-billing to 12-24 months unless the customer was intentionally fraudulent. Duke Energy here in Charlotte can only go back 12 months on billing disputes per NC regulations. Mike, make sure your attorney challenges both the rate classification AND the back-billing period. KU has the burden of proving why they should be allowed to go back 15 years when they approved the rate initially.
Update: PSC scheduled an informal conference for next month. KU's attorney sent over their 'evidence' which is basically just a printout saying student housing should be commercial. No tariff citations, no regulatory basis, nothing. Our attorney thinks they have a weak case and are hoping we'll settle for something less than the full $89k. Property owner wants to fight it all the way. The monthly billing is still under dispute too - we're paying under protest pending resolution.
Mike, sounds like you're in good shape. When utilities can't cite specific tariff language to support their position, they usually lose at the PSC level. We had a similar situation with TVA a few years ago where they tried to reclassify a mobile home park as commercial. They had no regulatory basis and the PSC ruled in our favor within 30 days. Make sure you ask for attorney fees if Kentucky allows it - utilities need to be held accountable for frivolous billing disputes like this.
Mike, I've been following your case with interest. This type of retroactive rate reclassification is becoming more common as utilities look for revenue. The fact that KU can't provide proper tariff support suggests they're on shaky ground. Document everything and make sure your attorney requests all internal KU communications about this property. Sometimes utilities have emails or memos that show the real reason behind these 'audits.' Good luck at the PSC conference - keep us posted on how it turns out.
Final update: KU dropped the entire case three days before the PSC hearing. Their attorney called our attorney and said they were 'withdrawing the billing adjustment.' No explanation, no apology, just dropped it. We're back on the original RM rate and they even refunded the extra charges from the past few months. Total victory but cost us $8,500 in legal fees. Thanks everyone for the support and advice - this forum was invaluable during the process.