Are You Getting Screwed On Electric, Gas, And Telecom Bills?

No matter what the size or vocation of your Company or Organization, when your electricity bill arrives at your Accounts Payable Department, they pay the bills, so that the lights do not go off at your facility.  Yet; the bills themselves are incomprehensible.  How does your Accounts Payable Department know that the Utility bills are correct? They don’t because no salaried employee has the skill set to comprehend the bills. You wouldn’t expect your employees to be able to analyze the invoice accuracy, rates, and tariffs on your electricity bill to be able to determine if you are overcharged.   And, if a billing error is going on, it will continue, month after month, and year after year.  And, even if they are detected, the policies on issuing credits on past billing errors, varies on a State by State basis, with recovery generally being limited to 1-3 years.  So, these undetected billing errors are a silent thief that never gets punished.

Incumbent Utilities that deliver your electricity and your natural gas, by Law, cannot make money nor lose money on your electricity or natural gas bill. Utility bills not only include your electricity and natural gas bills. They also include your Water and Sewer bills. And, they include all of your Telephone bills, including your regular analog Plain Old Telephone Lines, dubbed “POTS” lines, and/or your digital data lines that carry your Network traffic and Internet connectivity. They also include all of your mobile devices that carry your cellular calls and texts.   A common problem with telecommunications contracts is that embedded within the terms and conditions are automatic renewals that can kick-in during a short time-window.  They can also include covenants that have abhorrent early termination penalties.  The worst type of telecommunications contract will assess dramatic surcharges if your company or organization does not achieve the historical usage level that may be required in that service agreement.

Telephone regulations allow your incumbent phone company to provide third-party billing for other telecommunication providers who can range from anything from independent phone companies who provide long-distance services and voice mail providers to psychic hotlines.  These incumbent phone companies can charge these entities 15% to bill their customers.  Many of these 3rd party telecom providers get their sign-ups by outbound telemarketing efforts to unsuspecting employees who may unwittingly provide verbal consent to begin a service that again is silently appended to the phone bill every month, year after year.  Your incumbent phone company is allowed by Law, to do business with these entities.

While deregulation of the Telephone industry occurred back in 1984, deregulation of the electricity and natural gas industry is still underway.  Some States offer both deregulated electricity and deregulated natural gas. Texas, for example, deregulated its energy, meaning that electricity customers can select their electricity suppliers. Other States only offer deregulated natural gas.  The problem with deregulated electricity and natural gas is that it has become another haven for outbound telemarketers whose sales tactics are structured so it seems they are telling the truth.  But; unlike the swearing in of a witness in a criminal trial, it is not the “whole truth, and nothing, but; the truth.”  Here’s how you get screwed.  Incumbent Utilities are also allowed to act as third-party billing companies in doing the billing and collections for these deregulated natural gas companies.

Deregulated electricity and natural gas rate quotes can be represented by simply communicating the cost of the commodity itself, which is like buying a mattress without the box springs or the bed frame.  So, if you received a rate quote for electricity from a telemarketer, it likely does not include major charges such as capacity costs, line loss, and ancillary charges that the deregulated company doesn’t have to even mention which are then appended to your bill as what are deemed pass-through charges. These pass-through charges can amount to paying an effective rate that can be much higher than just the cost of the energy commodity itself, because all of those pass-through charges are being billed to you by the Incumbent Utility, versus being included in the rate quote you received from the telemarketer.

With deregulated electricity and natural gas rate quotes, they come in two flavors, fixed rates, and index rates.  Fixed rates are just like a real estate mortgage. You sign up typically for 1, 2, or 3-years and you get a fixed price.  However, if for example, you signed up for a deregulated electricity contract at 9 cents a kilowatt, because you were previously on a fixed rate contract and were paying 11 cents a kilowatt, you need to be aware that even though you are saving money from what you were previously paying, there is a risk that the cost of electricity may dip to 7 cents during the term of your contract. Similarly, if you sign up for an index rate for natural gas, which is a rate that fluctuates monthly on the open market, and there is inclement weather that drives up the cost of natural gas, you can lose money that way.

Now, let me tell you how you now get screwed. Rate quotes can be represented with what are called swing charges. Basically, a swing charge is a variance from the amount of usage you have contracted for electricity and/or natural gas. So, if you get quoted a 10% swing charge, it means that the rate quote is only good for the usage that is within 10% of the amount of electricity or natural gas you had agreed to purchase. And, that any higher variance would be charged at the prevailing retail rate, just like buying a retail pair of shoes.  So, knowing to ask for a rate quote for 100% Swing, meaning that the deregulated service provider is not going to charge you a higher rate for any variance in usage, is one way you can reduce the chances of getting screwed. The point here is that these basic facts are not being disclosed, and do not have to be disclosed, at the point of sale.  Knowing how the Utility game is played, will help you not to get screwed going forward.


Ron Feldman
Ron Feldman
RON has been recognized by Who’s Who In California and Who’s Who In Lodging. He has taught Business Services Marketing at the Undergraduate and MBA University levels. Feldman holds an undergraduate degree in Mass Communications, as well as a Masters Degree in Educational Psychology. Feldman previously had been retained as a consultant twice by a major publicly traded NYSE payments industry company to re-engineer their order processing, and restructure their telecom costs, as he had done for the Clients of the second largest Utility Auditing Company in the World. He has saved businesses and organizations millions of dollars in performing Utility Audits, since 1994. He was also retained by another NYSE Retailer to advise them in regards to their payment solutions for their customers. Feldman received a U.S. business method patent for a transaction processing technology focused on the hotel industry that he invented while working with Citicorp in developing their global multi-party settlement system in the late 1980’s. During that era, Feldman worked with SITA/Sahara, a global Internet-based organizations of airlines and hotels, and was formerly Vice-Chair of the Association of Travel Marketing Executives. Feldman has represented the United States in the World Championships of Tournament Bridge in 1982, 1986, and 1994. He founded the first accredited organization of Professional Bridge Players. Feldman also served on the National Conduct and Ethics Committee of the American Contract Bridge League (ACBL), as well as its National Marketing Committee. He resides in Petaluma, California in the Sonoma Wine Country.

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