Back Billing Blunder Binds Utility Company

If the telecom industry thinks it has billing nightmares, it is not alone. Telcos should be happy not to be grappling with the back billing nightmare that one Washington, D.C.-area utility company is facing.

Washington Gas Light Company, a natural gas utility that serves approximately 900,000 customers in Washington, D.C., Maryland and Virginia, is wrangling with state regulatory bodies, several county governments and consumer groups about how to rectify billing errors that have left many of their customers steaming.

The billing errors have affected nearly 25,800 of Washington Gas’s 380,000 customers in Virginia. Of those, about 9,500 were reportedly overbilled while approximately 16,300 were under-billed for their gas service.

Amazingly, these billing errors date back about 10 years, which is proving to be a great source of pain for both Washington Gas and its customers.

The billing errors came to light in March 2001 after a customer complained. The company then learned that the cause of the billing blunder is the delivery pressure of natural gas and the type of meter at the service address. Washington Gas launched an internal investigation of the situation to determine the extent of the errors. Currently, 5,472 customers who were incorrectly charged have been identified and notified by letter that they may owe money or may be eligible for a refund.

Washington Gas declined to comment directly about the evolving situation, but has outlined its position in several documents.

For over-billed customers, Washington Gas has proposed to provide refunds plus interest to customers for a five-year period. For those who were under-billed, the company is waiving interest, but will try to recoup its losses by billing customers for the under-charged amount. Customers will be able to pay the under-charged amount over five years.

Washington Gas believes contract law protects the company for going back only five years to make collections or refunds, instead of the entire duration of the disputed charges.

Compared to Telecom

In telecom, the dilemma over back billing still goes back and forth, but most argue that a telecom provider can retroactively bill for two years of charges incurred (see “Back Billing Rights Still Ill-Defined: Carrier Interpretations Differ on Reasonable Time For Invoicing,” Billing World, June 2000, page 80).

“There have been no specific rules on back billing, although there has been some precedent in our complaint process,” says Federal Communications Commission spokesman Michael Balmoris. According to Balmoris, in a 1997 case involving AT&T, the FCC at that time basically said it would determine on a case-by-case approach whether back billing was unreasonable or not.

Most in the telecom industry acknowledge that charging customers for billing errors that occurred throughout the customer’s billing history is a terrible customer relations move. Even if it does mean recapturing some of the revenue lost due to system errors, the money collected can be forever lost to mistrust over future billing that could trigger customer churn as well as damage the company’s reputation.

Telecom companies are required by law to credit back over-billings. Yet some believe that customers who have been under-billed may have some leverage when it comes to paying up—if a provider wants to keep a customer enough, it may not press too hard for the disputed charges (see “The Fallout of Billing Blunders: Many Corporate Billing Errors May Yet Be Uncovered,” Billing World, September 2000, page 22).

Determining Affected Accounts

Washington Gas submitted its proposal for identifying customers affected by the under- and overcharges to Virginia’s State Corporation Commission (SCC) earlier this year. In May the SCC requested comments for the utility’s plan to correct its billing errors affecting customers in the state. The parties involved in the discussion were Arlington and Fairfax counties, the Virginia Citizens Consumer Council and the competitive utilities service providers. The SCC granted an extension for the groups to try to come to an agreement about how to handle the situation.

According to a Washington Gas statement, the company must conduct an on-site inspection of every meter to determine billing accuracy for each customer. A field audit team has been established to conduct this testing.

Washington Gas is seeking to use the annual leak survey to identify affected residential and small commercial customers. The surveys—mandated by the state and federal governments—are regularly conducted from April to October on one-third of the company’s facilities to check the delivery pressure to customers.

“Washington Gas has a cycle by which they are automatically out looking for gas leaks on every property,” explains Ken Schrad, director of the SCC’s Division of Information Resources. “As they come to a particular property during the cycle to have the leak review, that’s the exact same time they would do a review as to the type of meter on the house and the pressure that was being delivered to that house.”

Allowing Washington Gas to use this method to check delivery pressure would be a lengthy process, involving one-third of the customers to be tested every year, with completion of the process slated for October 2004.

Indeed this is not only a huge public relations nightmare for Washington Gas, but it is also an expense for the company, which would have to hire contractors to test delivery pressure for large commercial customers. And complexities do not seem to stop there. In such a transient locale as the Washington, D.C., metropolitan area, it is likely that many former Washington Gas customers from the last 10 years no longer reside in their current homes. How will these customers learn about the situation and receive payment or be notified of what they owe?

While Washington Gas hashes the situation out with regulatory bodies, local governments, competitive providers and consumer groups, one thing remains certain: customers are likely to remain unsatisfied. No one likes to be overbilled. And when a consumer is overbilled for 10 years, hearing that only five years of the overcharges will be recouped is not likely to sound fair.

In the competitive telecom market, where customer acquisition and win-back are known to be expensive, it is not likely that a provider in this space could get away with such a billing blunder. Customers wouldn’t allow it, and most telcos couldn’t afford the churn.