Huntsville Utilities: Corrupt, or merely incompetent?

Over the past several weeks – perhaps indeed, months – Huntsville Utilities has come under increasing criticism; most recently for significant changes to their operations and policies.

The Huntsville Times‘ headlines for Friday, July 1, 2011 recently plastered the public utility with the headline “Charity targets utility’s high fees“.

At issue are the utility’s exorbitant rates for establishing initial service and reconnection – which in many cases can be as high as $1000, or more.

The Huntsville chapter of the Society of St. Vincent DePaul – a Catholic charity – spoke to the Huntsville Utilities Electric Board on behalf of the numerous local residents they have helped, and will help. Society spokesman Mac Yates said last year they paid Huntsville Utilities $114,830 on behalf of local residents whom have suffered hardship such as job loss or illness. However, the charity is finding it increasingly difficult to assist those whom need such temporary measures because of the utility’s recent changes in policy, procedure and practice.

Front page, Huntsville Times, Friday, 1 July 2011

HU now charges a $300 deposit to establish service if a customer has not had service with them within six months. Previously, the deposit was less than half that. If service is disconnected for non-payment, the utility now charges the arrearage, and an amount that is twice the highest bill, and a $60 reconnect fee. For a family whose highest bill was $300, that means the fee for reconnection could be $960.

Utility President & CEO Bill Pippin claimed that “The reason we charge two times the highest bill is because that’s what we get stuck with. Transients run up their bill and take off.”

Mr. Pippin then backpedaled and said, “We want to help everybody we can who is not hoodwinking us.”

Apparently, based upon Mr. Pippin’s remark, HU has been hookwinked.

Why, for example, has the utility failed to more thoroughly investigate their customers‘  backgrounds, and where their prospective customers have previously established utility service?

In past months – if not years – it has been painfully obvious that Huntsville Utilities has been run by incompetents.

For example, it was recently discovered that HU had underpaid the Tennessee Valley Authority by 1.6% for electricity over a period of 7 years. The underpayment scheme was discovered by an internal auditor in February 2011 only after HU examined their billing practices in response to TVA’s changes in seasonal demand-rate pricing.

Steve Doyle of The Huntsville Times reported April 21 that “the problem started in October 2003, when a utility employee created a computer billing code that mistakenly omitted monthly revenues from commercial customers using less than 1,000 kilowatt hours of electricity.”

The grand total of that computer “mistake” cost the utility $37.6 Million, and was paid in lump sum. Huntsville Utilities, like other utilities, purchases electricity at wholesale cost from TVA and resells it. And in the time since 2003 – date of the creation of that “error” – it had purchased over $2.3 Billion of electricity from TVA, which is its sole source supplier.

In response, Mr. Pippin said, “We are able to remit the full amount due to TVA,” and claimed that they were able to do so “without asking our customers to pay for it.” Somebody had to pay for that so-called “mistake.” But apparently, the customers did not. If not them, then who did?

HU had a reserve of $66 Million, which after payment of the arrearage in May, left the utility with a 45-day operating reserve.

What was even more curious was his statement that “the full amount of the annual underpayment had been put into our reserves each year.”

Why would the utility place “the full amount of the annual underpayment… into our reserves each year” unless they had known about it for several years?

However, Mr. Pippin again attempted to backpedal his announcement by shortly thereafter requesting an across-the-board rate increase of 3.5% for all customers – residential and commercial – from the Huntsville City Council.

Numerous monthly and annual TVA and internal audits completely missed the underpayment to TVA. Chief Operating Officer Jay Stowe said “Looking back now, quite frankly, it’s embarrassing that we didn’t catch it sooner. It should have been caught. I have difficulty understanding why it wasn’t.” He added that HU hired a forensic auditor to determine whether funds were stolen, and said that “All indications are that there’s no fraud.”

Yet equally problematic is that most recently, TVA had reduced their rates TWICE, totaling a 13% REDUCTION in less than six months. However, Huntsville Utilities has increased their electricity rate and suffered a loss of nearly 50% of their reserves because of a “mistake.”

Further, not only is the local utility increasing rates, but they have also changed the way they bill customers, they have also and changed the time frames for payment, and significantly reduced the so-called “grace” period for payment from the time the bill is printed, to the time it is considered delinquent – which also adversely affects the customer. In essence, the current bill is considered a “Final Notice.”

Electricity is not the only utility that HU sells. They also sell natural gas and water.

http://www.hsvutil.org/customer-service/start-stop-transfer-account/
Requirements to apply and set up a new account are:
(1.) 2 forms of valid identification, such as a valid driver’s license, military ID or social security card
(2.) A $300.00 deposit
(3.) A $60.00 non-refundable service fee
Deposit Reduction
Huntsville Utilities will reduce the residential deposit to $100.00 by providing one of the following items with all requirements met.
•    Letter of Credit – The customer submits an Acceptable Letter of Credit from a recent electric or gas utility on the utilities’ letterhead. The letter must indicate you have had service the past 12 months and also state that (a) you were not disconnected for non-payment (b) you had no more than 1 returned check or 1 trip to collect or attempt to collect.
•    Guarantee of Account – The customer provides a properly executed Waiver of Additional Deposit Agreement with the Guarantor having a current account with Huntsville Utilities with at least 36 months history with a good payment history and no collection activity*.
•    Satisfactory Credit with Huntsville Utilities – 36 months of continuous service with Huntsville Utilities with no collection activity*.
Collection Activity:
•    Any account that has been cut-off for any reason during the last 36 months
•    Any amount in Huntsville Utilities’ bad debt account, currently or within the past 7 years
(More than one of the following during the last 36 months)
•    Trip made to residence to collect
•    Trip made to residence in an attempt to collect
•    Returned check or draft

Service charges are imposed for the following: new and/or first time service; transfer of existing service; accelerated service connection; reconnection charges for services interrupted for nonpayment; trips to a service address to collect payment; recall of disconnection order; handling of any type remittance returned from any financial institution; trips to a service address to cut on or cut off a utility at a customer’s request; trips to reread inaccessible meters or rereads at a customer’s request where the reading is found to be correct; and trips to test meters at a customer’s request where the meter accuracy is found to be correct.