A city audit of Gainesville Regional Utilities’ invoices alleged that the company has overpaid more than $872,000 to contracted energy company, Gainesville Renewable Energy Center, since late 2013.
The audit, which was presented at the Audit and Finance Committee Tuesday afternoon, was asked for by GRU last year and spanned from Jan. 1, 2014 to May 31, 2015. Its focus was the approval process for invoices from GREC, and auditors found that a miscalculation of one rate resulted in GRU paying more than it was contracted for, by the city’s interpretation of the contract.
“GRU has paid $900,000 more than they should have,” said Carlos Holt, city auditor. “And at some point it translates to the rate payers.”
These costs are dispersed to the utility customers. If the overpayment is amortized on residential customers, more than 93,000 people have paid an average of $9 extra. How GRU and its customers will recoup these overpayments, and avoid further overcharges, is yet to be determined. The current charge structure will continue until the contract dispute is decided.
The corrective action plan included in the audit proposes is to be decided by the end of the year. Further steps to make that happen may include a full arbitration or the city paying in protest.
“Obviously [the city] would be looking to recoup [the overpayment], to charge it back, credit it on the invoice or to have them pay it back and adjust the rate going forward,” Holt said.
The discrepancy was found in the Construction Cost Adjuster, a metric that protected both parties from inflation and changing construction costs between the contract agreement and the start of construction.
Instead of using a conversion rate from United States dollars to euros, the price was being derived from a conversion of the euros to dollars rate, resulting in an overpayment by GRU of 77 cents per megawatt-hour, Holt said. Having paid for 1,133,115 MW-h of energy since GREC began operating, this resulted in an overpayment of $872,498.
GREC disputes this calculation, according to GREC Chief Financial Officer Al Morales, saying the conversion rate is correctly used in the contract.
“The alleged overpayments are another issue concocted by the city to further its professed goal of extracting concessions from GREC,” Morales said in an email. “The allegations are without merit and contrary to the plain example in the Power Purchase Agreement. In fact, the calculation of the current Construction Cost Adjuster was reviewed and agreed to by GRU and its expert advisors.”
Despite the disagreement, Holt said throughout the entire auditing process both the GRU and GREC staff were more than accommodating and open about their work.
It’s unclear how the audit will factor into Thursday’s City Commission meeting, which is scheduled to include discussion on further increasing GRU rates.