Auditors Say EPB Overbilled City By $17,000; Street Light Billing Now On Track, Officials Say

Monday, August 25, 2014 - by Gail Perry

EPB auditors have given adjusted figures on whether EPB over-billed or under-billed the city of Chattanooga on the street lighting program.

EPB officials said, "The net impact of the 89-month audit shows the city was over-billed by $17,000."

Stan Sewell, city internal auditor, said, "During a meeting with Mauldin & Jenkins last week, we reviewed a (draft) revision Mauldin & Jenkins developed to the adjustments they initially reported in their July 21, 2014 dated report.  These adjustments resulted in a change from almost $700,000 due from the city to EPB to approximately $17,000 due from EPB to the city."

The issue next goes to a city audit committee.

Going forward EPB has an improved billing process in place for city street lighting, President and CEO Harold DePriest said Monday.

An update on the independent audit relating to the cost of streetlights in Chattanooga was given at a meeting of the EPB board of directors.

The audit was done at the request of Chattanooga Mayor Andy Berke in response to a media report that EPB overbilled the city over $5 million. The independent audit conducted by Mauldin and Jenkins covered 89 months that ended in May 2014, the entire time that records are retained by EPB.

Focus was on energy usage, facilities charges and for the “secondary line loss” which is the energy that is lost as it transmitted along the power lines.

Misclassification of the type of lights was discovered 12-18 months ago, with a number of them misidentified as mercury vapor which is an older and less energy efficient light source than high pressure sodium lights that are more commonly in use.

Street lights should be billed on 4,377 hours per light of burn time which is calculated on the average sunlight during the year. The audit discovered that EPB had only been billing the city for 4,200 hours yearly and resulted in under-billing in that category.

The Environmental Protection Agency supplies information about the loss of energy as it is distributed along the lines. That loss has been calculated at five percent which must also be billed. It was discovered that EPB had not been adding this loss when billing for the street lights, another issue of under-billing Chattanooga.

 Facilities charges include overhead as well as the physical cost of the structures.  Operations and maintenance such as dealing with power outages and replacing lights that have burned out and poles that are damaged also fall into this category which had been slightly under billed.

 The audit of 26,000 street lights for the past seven years showed that the over- and under-billing resulted in almost “a wash.” The processes are being corrected, said EPB's John Pless.  The city’s audit was prepared with different assumptions and it covered a shorter amount of time than the audit prepared by Mauldin and Jenkins. These factors caused differences between the independent audit and the one done by Chattanooga.

Mr. DePriest said he wanted to make sure that Daisy Madison, finance officer of Chattanooga, was comfortable with the corrective action plan. Mike Kaiser, assistant vice president of finance, indicated that Ms. Madison is being kept informed on the corrective action plan in progress.

The monthly financial report given by Greg Eaves, finance director and CFO, showed that electric revenue for July 2014 came in below forecast due to less electric sales. This was because of mild temperatures during the month. During the same time period, the fiber optics business revenue came in above what was  budgeted.

 In the five years since the smart grid and fiber optics system was installed, 60,000 residential and 5,100 business customers have signed up for fiber optic services. This is of benefit to all customers, said Mr. Pless. Revenue from fiber optics helps keep the electric rates lower since that side of the business pays the electric side for use of the fiber lines.

Revenue from those leases has been used to pay down the debt on the telecom business that was in place before the fiber optics network was installed. EPB Telecom debt is expected to be totally paid off by next spring.


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