Why aren’t many organizations routinely auditing one of their biggest controllable operating expenses—utility bills? In some cases, the people who are responsible for paying the bills aren’t the same people who are actually using the utilities. This disconnect can foster a few energy myths that perpetuate wasteful utility use and spending.
But energy costs aren’t fixed. They’re impacted by internal and external factors, many of which are controllable.
Individuals can make decisions every day that significantly impact overall energy consumption for an organization. And new technologies in energy production and conservation can dramatically lower monthly and yearly utility costs.
The key to energy savings is understanding these factors, whether they’re controllable (lighting, insulation, thermostats) or uncontrollable (weather, utility rate changes). And the key to understanding is utility bill auditing.
Think of your organization’s monthly utility bills as a treasure trove of data, just waiting to be mined for big savings. How can you interpret that data in a way that will save energy and money? This eBook will show you 20 utility bill audits to help you find savings.
Most of these audits are easy to perform and require little or no training to implement. Each has the potential to help you spot savings for your organization. So read on…and start saving today!
Date audits involve a comparison of date information from one utility bill to the next. Your utility bill contains several important dates:
Date audits are important because date errors can result in faulty energy analytics and unreliable audit results. This is because date-related data affects key comparisons from billing period to billing period, such as average daily use or average daily cost. So you should always start your utility auditing program with a focus on date accuracy for current and historic bills.
Date audits often reveal data entry errors, and can also reveal utility billing errors by the commodity vendor. Here are six important date-related audits that may reveal savings opportunities:
1. Billing Period Length is abnormally long or abnormally short. An “abnormal” length can be determined by comparing the current bill with historical bills. Is this a monthly bill or a quarterly bill? If the billing period length is abnormally long or abnormally short, it could be an indication that there is a data entry error that may affect other audits.
2. Gap between End Date of last bill and Start Date of current bill. Gaps between bills may indicate a missing bill or a bill entry error. Most utility vendors use the End Date of the last bill as the Start Date for the current bill. But a handful of vendors assume meter reading at midnight, so the Start Date for the current bill is one day later than the End Date of the last utility bill. Make sure you know your vendor’s practice, so you can determine if your utility bills reflect the correct dates for each billing period.
3. Due Date or Statement Date is too long after End Date. Typically the bill Due Date is 20 to 30 days after the Statement Date. The Statement Date will be one to four days after the End Date. Anything outside these parameters may indicate an issue with the bill.
4. End Date is later than today. Some bills may include a future End Date, but these situations are very uncommon. A future End Date may indicate a bill entry error that will negatively impact your analytics and audits.
5. Due Date or Statement Date is before End Date. This type of audit result is typically the result of a bill entry error.
6. Start/End Dates (meter read dates) overlap with another bill. This is an unusual situation that may indicate a cancel/rebill situation, data entry error, or possibly a meter change. But an overlap with other bills for the same meter could also be an indication that the customer has been billed repeatedly for the same energy.
Use audits usually reveal issues with a faulty meter, an incorrect meter read, a billing error, or a data entry error. Failed use audits may reveal long-standing problems or issues, and the savings can be tens or hundreds of thousands of dollars.
One municipal analyst using the EnergyCAP energy management software discovered that for years her city had been paying an expensive monthly electric bill for a vacated property. Because the property was inaccessible to the meter reader, monthly use was estimated by the vendor. It was not until the software revealed a consistent pattern of use estimates that the problem was discovered. The vendor reimbursed the city for the full amount of the overcharges.
Here are five date-related audits that may reveal savings opportunities:
7. Use-Per-Day is higher than previous bills on the same meter. This audit is very effective for meters that have a steady use pattern from month to month. It is not so good for meters with seasonal use, since “swing months” may generate false positive audit results.
8. There are too many consecutive estimated bills on the account. Multiple consecutive estimated bills can indicate that the utility vendor no longer has access to the meter to obtain a meter reading, as illustrated in the example above.
9. Use-Per-Day is the same as the prior bill. It is unusual for commodity use to be identical from one billing period to the next, since so many factors affect monthly energy usage. If your check reveals matching use values from one month to another, check to see if the bill is estimated.
If it is estimated, and especially if it has been estimated for several consecutive periods, there may be a billing error that is costing you a lot of money.
10. Bill has cost but no use. Although some accounts/meters are not billed on use (streetlights, some water accounts in some locations), this is the exception and not the rule. A bill with cost but no use could indicate that the meter is inactive and should not be incurring utility expenses. Check it out!
11. Highest Use-Per-Day in the last 12 months. Whenever the use or the use-per-day values hit a 12-month high, it is important to determine if the use is reasonable. An investigation may reveal a billing error, a faulty meter, a leaky pipe, or another important and costly situation. Prompt attention may result in big savings.
Like Energy Use Audits, Cost Audits may also reveal errors from a faulty meter or meter reading, billing errors, or data entry errors. Since utility rates may vary significantly from billing period to billing period due to factors like seasonality, electric demand, use, and ratchet situations, Cost Audits may be more difficult to perform. Two audits that may offer opportunities for savings include the following:
12. Cost-Per-Day is higher than on previous bills from the same meter. A cost analysis for meters with relatively steady month-to-month use can often reveal problems and opportunities for savings. Note, however, that this audit may not work well for seasonal meters, as “swing months” may generate false-positive audit results.
It is also important to analyze cost-per-day in tandem with the monthly cost and unit cost data, since each of these values will offer insights. A meter with nearly identical daily or monthly cost, but a significant decrease in unit cost (perhaps due to a rate change) may provide a clue that points to undesirable use patterns (savings opportunity).
13. Cost-Per-Day or Unit Cost varies from same month last year. This audit is more appropriate for seasonal meters, for the same reasons mentioned in the discussion of Energy Use Audits. It is also important to consider both Unit Cost and Average Daily Cost, since both comparisons offer unique insights into energy performance. A jump in average daily cost may signal a significant jump in use or a rate change. Unusual variances in Unit Cost can often point to data entry errors.
14. Calculated total bill cost does not match the vendor-provided total bill cost. This audit is especially useful when you are importing or hand-keying your utility bill data into and accounts-payable application, a spreadsheet, or utility bill accounting application, such as EnergyCAP. You want to confirm that the information is entered accurately and completely. Otherwise, you may pay an incorrect amount or base decisions on inaccurate data. A simple check is to make sure the individual bill items sum to the total cost noted on the bill. A mismatch could signify missing data, a typo, or an incorrect vendor bill.
Demand audits apply only to the electric commodity. Demand refers to the “peak use” (maximum kW) associated with a meter over the entire billing period. It is the demand that the utility supplier must be prepared to supply to that customer at any time. Most utility companies charge a rate premium based on this demonstrated use that may affect the customer’s rates for future months.
These types of electric rates are called Ratchet rates, and can explain why you will see the identical demand being assessed on monthly electric bills for several successive months. This demand “penalty” for a single instance of peak energy use can often be reduced through load reallocation, retrofits, and other energy management practices.
One school system reduced their demand significantly by firing the pottery kiln in the art department at times when the school’s kitchens were not operating. For industries that have some flexibility in scheduling energy-intensive activity, load reallocation offers the potential for significant demand savings.
Load factor is a value associated with demand. It refers to a ratio between the actual amount of monthly energy usage (in the numerator) and the potential use (in the denominator) as determined by the meter’s peak demand. In calculating potential use, the utility vendor will multiply the peak kilowatt use by the total number of hours in the billing period to determine the maximum possible use in kilowatt hours (kWh) over the billing period.
Load factor will vary widely based on the type of use associated with the meter. Office buildings and retail locations often see load factors of 40–60 percent, based on their operating hours. Meters with very high load factors are often associated with equipment that is operating more or less continuously (parking garage lighting, for example). A very low load factor may be observed for meters associated with outdoor recreational lighting, where the load is intense but sporadic.
Here are five important demand audits:
15. Abnormally High Load Factor (over 100%). A load factor of over 100 percent is theoretically impossible, so a load factor in excess of 100 percent would indicate a billing error (use is too high, demand is too low, or number of days is too low).
16. Abnormally Low Load Factor (.1% to 15%). Very few meters exhibit use patterns with a load factor of 15 percent or less. This may indicate a billing error such as: Use too low, demand too high, or days in the billing period too high.
17. Billed Demand varies from same month last year. This test avoids issues with seasonal fluctuations in energy use.
18. Highest Billed Demand in last 12 months. Just like the similar cost and use audits, this audit should lead the energy auditor to ask if the demand is reasonable.
19. Exact Same Billed Demand multiple months in a row. This condition may indicate that a demand ratchet is in effect. Check your rate schedule to find out. As mentioned above, there are several ways to reduce peak demand. Demand reductions may save big bucks over several billing periods depending on the rate structure for the affected meter.
Here are two more audits to help ensure that your utility vendor is only charging you for the energy you actually used.
20. Duplicate Bill. A possible duplicate bill can be discovered by comparing the Pay Amount, Start Date, End Date and/or Statement Date of the current bill with other invoices in your bill history for that meter. If any or all of these dates are identical with a historical bill, the bill may be a duplicate. Don’t jump to conclusions since some accounts may bill the same Pay Amount each month. You’ll need to cross-check the Start/End dates to make sure the bill is unique.
We said we’d give you 20 ways to find utility bill savings, but here’s a bonus one.
21. Rate Audits. If you want to verify that the vendor is charging the correct amount for your energy use, try calculating your bill using the vendor rate schedule to see if you get the same results. It’s important to understand what rates your accounts are on and why. It’s also important to know what alternative rates are available to you.
There are multiple ways to audit utility bills, from the informal “eyeball test” to more sophisticated application-based analyses. If you receive a small number of relatively simple bills each month, a quick visual check may be enough. Tracking and analyzing bills in spreadsheets, where self-constructed tables and charts may tip you off to potential bill anomalies, is a common approach. Unfortunately, simple spreadsheets—tracking dates, use, and cost only, for example—may not catch some underlying issues that can be very costly. Spreadsheets that are set up to track utility bill details quickly become highly complex and difficult to use or maintain by anyone other than the spreadsheet’s creator.
Applications, such as the popular EnergyCAP utility bill accounting software, offer audit functionality that is not only sophisticated but also automated. Utility bills undergo detailed checks as they are entered or imported, and potential issues are flagged for your immediate review and resolution. Being able to assign bill issues and maintain a “paper trail” of the steps taken to resolve the issues is also important for long-term record-keeping and documentation purposes.
When implementing your utility bill auditing process, it’s important to consider the volume of bills to be checked, bill complexity, and the potential cost of not auditing the bills properly:
Answer these questions, and you will be well on the way to establishing an effective utility bill audit process.
To learn more about utility bill audits, here are some helpful resources: