With his business down by 25 percent because of lagging sales, Intersign Corp. President Hank McMahon said he felt sucker punched when EPB said it was doubling his bill and collecting another $121,000 for improperly billed power over the past three years.
"I felt like I was hit with a sledgehammer in the stomach," said McMahon, whose company employs 93 people to make signs. "If I make a mistake in my business, I have to absorb that loss. But with EPB, their mistakes are passed along to their customers."
EPB officials admit a transformer installation error by one of their employees in 2005 resulted in the inaccurate power bills over the past five years.
Executive Vice President David Wade said such metering errors are rare among the more than 160,000 homes and businesses the city-owned utility serves.
But in response to an open records request, EPB spokeswoman Dana Bailey said the utility has recorded 200 such metering errors since 2005.
As a TVA-regulated distributor, EPB must charge consumers the same amount for electricity, even if the customer is wrongly billed. State law requires the customer to make up for any discovered deficiencies going back 36 months.
Wade said it would be easier on EPB to absorb the loss "than to have to sit there and tell our customer we made this mistake."
"We're not doing this because it is the easy thing, we are doing it because it is the right thing," Wade said. "That customer did use that energy and if we don't charge that customer then we are really giving them an unfair advantage."
The problem at Intersign developed when a transformer was changed in 2005 at the 55,000-square-foot building on Amnicola Highway, which then was owned by National Poster Co.
Wade said an installation error meant the metering equipment was improperly calibrated so it recorded only half the actual electricity usage.
When another metering error was found at another business, it was determined that the equipment had been improperly switched between that business and Intersign's building.
"It was a human error in getting the meter readings right," Wade said.
Intersign now has to pay twice as much each month for its power and also will have to pay EPB for $121,000 worth of power that was not properly billed in the previous three years.
"We can be pretty flexible in how long it takes to pay this back," Wade said.
But Intersign's chief operating officer, Jim Roides, said the higher power rates are boosting Intersign's monthly electricity bill to $6,777 from the $3,837 previously paid by the business.
"This average increase equates to two to three jobs we will need to eliminate, based on EPB's human error, to control our costs," he said. "Where is the accountability and responsibility on EPB's part?"
Roides said no other business he knows of "would even consider approaching their customers and demand back billing under any terms."
McMahon said EPB's error also led his company to pay more than he otherwise would have to buy the factory at the end of 2006, since its purchase offer was based in part on projected utility bills.
The Intersign executives said they were particularly upset to learn that EPB will pocket all of the back payments for power. The city utility already has paid the Tennessee Valley Authority for the electricity through its wholesale purchase contracts.
A TVA Inspector General's audit released in August said EPB had cash reserves equal to 13 percent of its revenues, or more than twice the minimum cash margin required. It had the strongest balance sheet of any of TVA's major municipal distributors, according to the audit.
But McMahon said he spends at least a quarter of his time figuring out how to cut costs to avoid more layoffs after two rounds of staff cuts in the past year.
"It's extremely hard to have to look somebody in the eye and tell them that because of economic conditions we can no longer afford to keep you on the payroll," McMahon said.
"Is EPB going to tell the next employees we have to lay off that they don't have a job because [the utility] messed up?"