Strength in Numbers: How 31 DC Institutions Worked Together to Fight Overcharges
Strength in numbers is not just a tagline for CPA Co-op, it is the philosophy behind everything we do. The strength of our group was displayed in full force last month when a routine PEPCO bill review forced us to confront the realities of a shifting energy industry.
It all began when the COO at one of our member charter schools reached out to express concern over increased charges on his electricity bill. He was seeing enormous charges due to a change in his capacity tags and noticed a line item reading “Misc Adjustment” was upwards of $1,200. What was supposed to be a locked rate of 6.9 cents per kWh, was now effectively over 10 cents per kWh.
After reviewing 6 months of bills and noticing more than $9,000 of overcharges, we started to wonder if this wasn’t an isolated incident. Upon request, Marjean (Director of Operations at Chavez Schools) shared six months of her energy bills for us to review. We discovered that she too was experiencing a dramatic increase in overcharges.
In the spirit of strength in numbers, we reached out to dozens of non-profits in our network to request their energy bills. In less than three days, members submitted and our team analyzed over 500 PEPCO invoices.
By gathering and synthesizing this data (as well as comparing to other suppliers during the same time period), we realized something serious was happening, and that our members had a strong case for confronting the energy supplier in question.
What happened next happened rapidly: we gathered all 31 organizations on a conference call to discuss the analysis and agree on a plan of action. We also engaged a team of five lawyers to develop a strategy and conducted direct negotiations with the supplier’s senior leadership -- all within the same week.
In the negotiation with the supplier--before diving into the technical calculations of pass through charges, and accompanying justifications--we shared the analysis that our collective invoices helped us prepare, and the stories that many of our members shared about the experience of paying such high rates. The supplier asserted that the contract language as written allowed them to pass along all of these overcharges, and that their business decisions to pass along the costs were necessary given the cost increases they experienced while serving our group.
We moved the conversation beyond just what they were legally allowed to do in order to focus on the detrimental effects of their business decisions. Although the supplier maintained that the charges are legitimate and appropriate, they indicated that they wished to settle this matter directly with our group, avoiding formal action.
After much back and forth with their leadership, the supplier yielded to the interests of our group and offered the following resolution:
Stop current overcharges - The supplier agreed to stop passing along the Capacity Costs line item charge (about 30% of the pass through charges seen).
Stop future overcharges - They also agreed to waive the early termination fee immediately so that CPA Members could choose another supply contract.
Recover compensation for past overcharges - The supplier offered our members $45,000 in total reimbursements (about half of the overcharges experienced).
Now that our members were free to choose a different supplier, we launched a rapid-fire energy aggregation in early December. What typically takes a month of preparation to accomplish, we pulled off in less than a week, and in the final day of business before the holidays. When the dust had cleared, every affected CPA member was able to leave their previous contract without penalty, had compensation headed their way, and had signed a new supply contract that offers much greater protection from the excessive overcharges they had experienced in the past.
It was an incredible and unprecedented victory. More importantly, it was a victory that would not have been possible without the leverage of our entire group. Members had been noticing overcharges across a number of suppliers, sometimes significant, in the last few years - but never had they had success in resolving the issue alone. Again, strength in numbers.
This victory illustrates how our co-op is developing new ways to leverage information from dozens of members’ experiences and translate into actionable insight for other members at the time of purchase. For example, we’ve implemented a risk-adjusted electricity price analyses that helps our members compare suppliers not just by the “sticker” price they offer, but how they actually perform in keeping overcharges low. One of our suppliers even commented that this analysis is better than they see from their Fortune 100 clients.
By gathering in peer groups and on conference calls, we’re building relationships that infuse deeper meaning to the practical work of business management. By building this culture of connection, we’re finding new ways to make smarter decisions more aligned with our values.
Do you currently have a third party electricity contract and want to monitor how your supplier is performing? Just respond with a copy of your electricity contract and the last three months of PEPCO bills. We’ll compare how your supplier is performing against hundreds of other organizations in similar contracts.