Building Operating Management

How Disasters Impact Utility Bills: Lessons From Superstorm Sandy

Lessons from the October 2012 Superstorm Sandy on how disasters impact utility bills continue to appear. Some buildings that lost power for weeks (or, in a few cases, months) found that during such outages, they were billed for power they didn't use, at rates that were unfair or inconsistent. Utility actions before and during the storm may have worsened — or lengthened — service outages.

Along with placing sensitive electrical equipment above future flood lines, facility managers are learning that other aspects of power supply may need attention too, including legal relationships with power providers. To mitigate future problems, facility managers should review utility tariffs and disaster preparations with utility account reps. Following are six stories from the trenches that should inform those discussions.

1. Minimum Charges. Many utility tariffs contain charges designed to deal with periods when a customer's business may not be taking as much power as in the past. Such charges are designed to recover base utility investments for serving a facility that occur regardless of how much power is consumed. One customer whose electric feeders were out for several months was startled, however, when he received large bills that, despite the fact most of his power came from a rented diesel generator, resulted from using too little utility power.

Facility managers should read and understand how tariffs may charge based on a minimum usage. In some cases, a ratchet clause exists that charges based on a percent (e.g., 50 percent) of the peak electric demand seen in the prior 12 months. Whenever actual demand falls below that percent threshold, a fee equivalent to 50 percent of the highest peak demand charge is levied in that month. In other cases, a minimum revenue requirement may be based on a percent of prior kWh usage, multiplied by the standard dollars per kWh rate.

Unlike retail power contracts in deregulated states, utility tariffs do not include a force majeure clause that lets a customer out of such charges due to circumstances beyond its control (e.g., failure of the utility to deliver all of the customer's power). When brought to their attention, some utilities have forgiven or refunded such charges.

2. Estimated Bills. After the storm, some buildings had partial utility service but Sandy's salt water had knocked out their electric meters. Utilities then rendered estimated bills based on usage in the same month in the prior year, when no outage had occurred. "Charging me a full bill when half my tenant space had been evacuated just isn't fair," one facility manager complained. Other customers are still trying to divine how the utility estimated bills during periods when no power was delivered.

Several states hit hardest by Sandy are deregulated, meaning that customers go to non-utility suppliers to buy power, which the utility then delivers. When such a utility charges for its delivery service based on an estimated kWh usage, the power supplier uses the same estimates for power it supplies. As a result, efforts to recover charges from erroneous estimates have to be pursued with both utility and power supplier.

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  posted on 10/3/2014   Article Use Policy