EPB announces fifth audit on Chattanooga streetlights

Thursday, June 5, 2014

photo EPB President and CEO Harold DePriest speaks during a news conference Tuesday at the company's downtown headquarters to address city streetlight billing.
photo Chattanooga Mayor Andy Berke

Chattanooga is a great place to be an auditor. The Scenic City has fast Internet, cheap office space and more than enough work to go around.

City-owned utility EPB on Tuesday announced another in a series of audits aimed at unraveling Chattanooga's streetlight replacement program, which has come under fire for fuzzy figures.

Though it's the fifth study related to the streetlight program in recent months, it's the third analysis by EPB since last year and will take place simultaneously alongside a city audit already under way.

"Two sets of eyes reviewing these numbers are better than one, especially when it potentially impacts Chattanooga taxpayers," said Lacie Stone, director of communications for the city.

The first analysis took place when EPB discovered -- either on its own or through another city vendor, depending on who's telling the story -- that the streetlights for which EPB was charging the city weren't the same streetlights it actually had on the poles.

EPB crews then physically counted each of its 26,000 lights, and discovered that it was charging the city for thousands of old-fashioned mercury-vapor lights that had long since been replaced by more energy-efficient high-pressure sodium lights.

EPB met with city officials about the matter, and noted that overbilling for energy and underbilling for new lights resulted in no net overcharge for city taxpayers. And that would have been that, had the Berke administration applied the changes to its ongoing analysis of its streetlight replacement program or briefed the City Council about the matter.

But the misclassification of the city's streetlight portfolio was affecting the ability of local vendor Global Green Lighting and the City Council to properly calculate the energy savings derived from replacing EPB's lights with its newer LED lights made by Global Green Lighting. Without knowing which light was on the pole in the first place, no one could agree on the cost savings of putting up a new light.

The City Council asked independent auditor Stan Sewell to look at the city's analysis and determine the true cost savings of replacing EPB with Global Green Lighting as Chattanooga's streetlight vendor. Thus, audit number two.

Sewell determined that, based on errors in the city's assumptions, along with new assurances from Global Green, the city was projected to overpay EPB nearly $5 million over the life of the streetlight replacement project, based on $250,000 in projected overpayments for the base year.

That raised another question: How long had this streetlight mix-up been going on, and how much, if anything, was it costing taxpayers?

So EPB responded with another audit -- the first by outside firm Mauldin Jenkins, the second sponsored by the utility and the third audit overall -- showing a total of 3,721 high-pressure sodium lights had been improperly classified as mercury vapor lights. The net fallout was that the city had paid more for energy, but had essentially paid nothing for the misclassified high-pressure sodium lights that were actually on the poles, leading to net underbilling of about $51,453.

The city council asked Sewell to verify EPB's review -- the fourth audit -- by going back to determine whether the utility's numbers were accurate.

But Chattanooga Mayor Andy Berke wanted to be sure. So in spite of the fact that the city's own internal auditor is fully engaged in verifying EPB's data, the mayor on Saturday sent a letter to EPB's board asking them to conduct their own audit, the fifth overall.

In response, the utility's board announced on Tuesday that it would again engage Mauldin & Jenkins, this time to take a deeper dive into the utility's books and data. EPB said there have been only two complete financial audits of the streetlight program by certified public accountants - one by Sewell and the other by Mauldin & Jenkins, both of which are now being updated.

Harold DePriest, president and CEO of EPB, said he doesn't expect the audit to find anything, but he'll do whatever it takes to fix any problems found by auditors.

"As far as we're concerned at EPB, we really don't care if the numbers turn out to be big dollars, little dollars, or as I expect, zero dollars," DePriest said at a news conference on Tuesday.

"We'll do what's right."

Contact staff writer Ellis Smith at 423-757-6315 or esmith@timesfreepress.com with tips and documents.