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Billing process

Late fees and unreturned deposits

Late fees charged on payments that arrived on time, and security deposits held long after the utility's own rules require their return.

How often we find it
Found in roughly 1 in 4 multi-site portfolios we audit
Typical impact
Deposits of $2,000 to $50,000 per account plus 1% to 2% monthly late charges

Utility tariffs and state commission rules set both the late payment charge and the terms for security deposits. Late charges are typically a percentage of the past-due balance, assessed when payment is not received by the due date. In multi-site portfolios they are often billed in error: a lockbox posts a payment a few days late, a payment covering several accounts is applied to the wrong one, or a summary payment arrives on time but is not split across accounts before the cutoff. Deposits are a separate and larger issue. Utilities may require a deposit from new commercial accounts, but most tariffs require the deposit to be refunded or credited, often with interest, after a set period of on-time payment, commonly 12 to 24 months depending on the state and utility. In practice, deposits stay on accounts for years. Across hundreds of sites they add up to working capital held by the utility with no business reason to keep it.

How it happens

  • Payments arrive by the due date but post late at the utility's lockbox or processor.
  • A single payment for many accounts is misapplied, leaving some accounts past due.
  • A late charge is assessed on a disputed amount that the tariff protects while the dispute is open.
  • The utility does not run its periodic deposit review, so deposits are never returned after the on-time period.
  • Interest owed on the deposit is never credited.

How to detect it

  • Match each late charge to the payment's bank clearing date and the bill's due date.
  • Check for late charges assessed on amounts under formal or informal dispute.
  • List every deposit on every account with its date and the account's payment history since.
  • Compare deposit holding periods to the utility's tariff rule for return and interest.

Evidence the utility will accept

  • Bank records showing payment dates and remittance detail
  • Bills showing late charges and due dates
  • Deposit receipts or the bill line showing the deposit held
  • Payment history for the period required by the tariff

Recovering the overcharge

We send the utility a deposit return request citing its tariff rule, with the account's payment history, and request the deposit plus any accrued interest as a check or credit. Late fee reversals are requested separately with bank clearing records for each payment. Utilities usually process both within one or two cycles, and a large portfolio often recovers six figures in deposits alone.

Questions we get asked

Many do, at a rate set by the commission or the tariff, but the rules vary. We check each utility's provision before calculating what is owed.

Return rules usually require a stated record of on-time payments, so a late payment may restart or extend the period. A late charge that was itself an error should not count.

Many utilities accept alternatives for commercial accounts. We can request that where it frees working capital.

Find this error in your own bills.

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from bill access to first findings report
21 daysfrom bill access to first findings report
of filed claims accepted by the utility in full or in part
94%of filed claims accepted by the utility in full or in part