WBRC Exclusive: Birmingham Water Works audit shows billing problems started earlier, more widespread than utility admitted

The report faults BWWB management for failure to catch the backlog of bills that may have overcharged thousands, warns of changes needed
Published: Oct. 25, 2022 at 4:36 PM CDT|Updated: Oct. 25, 2022 at 4:43 PM CDT
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BIRMINGHAM, Ala. (WBRC) - A new audit of the billing problems plaguing the Birmingham Water Works Board finds the backlog of unread meters or unissued bills began much earlier than previously thought, affected more customers than previously publicly acknowledged, and faults the utility’s management for a lack of training, staffing, and knowledge of basic processes in key areas of the billing operations. The audit also alleges the utility’s management may have mislead the Board about the extent of the problem and whether it was solved and warns the issues may still not be solved. The audit also warns that changes are needed to make sure the same problems don’t repeat themselves.

Former BWWB General Manager Mac Underwood’s firm conducted the audit, ordered by former BWWB Board Chair Chris Rice before his resignation and prompted by complaints from customers who went months without getting a bill, then got multiple bills for multiple months all at once.

When WBRC first began reporting on this issue in February, BWWB GM Michael Johnson said the utility was about 10 days behind and working to catch up. The Underwood audit shows by that point, the utility was behind on more than 68,000 of its 200,000 or so residential accounts. The audit shows the billing problems started at least in August of 2021, but auditors say it could have started even before that.

BWW meter reading
BWW meter reading(WBRC FOX6 News)

As this chart in the audit shows, the water works was already more than 21,000 accounts behind by the end of September of 2021 and was more than 84,000 accounts behind by the end of December - the same month the utility fired 3 billing department employees for allegedly falsifying meter readings - charges those employees deny. Two of those employees told WBRC they warned utility management of problems in the billing department months before. WBRC has obtained recordings and emails of similar warnings in December - but by then the backlog had grown to encompass almost 1/2 of the utility’s residential customers, according to the Underwood report.

The audit finds the utility did begin to catch up during the spring months, but Rice told Underwood’s team that BWWB management reported to him in early July that all of the unbilled accounts had been resolved by the end of June 2022, when in fact, the report finds “there were more than 25,000 unbilled active accounts which means meter reading, and billing continued to be behind schedule causing delayed bills.”

More than 8800 Water Works customers may have been unfairly billed at higher rates over the last year because their meters weren’t read in the in less than the 37-day timeframe mandated by a court order and BWWB policy, according to the Underwood audit. The utility’s 3-tiered rate structure charges customers more per CCF of use the more they use, which would mean customers who aren’t billed on time could be charged more per gallon than they would have if their meter was read on time.

For example: If Customer A used 6 CCF ($46.12) for the normal January billing cycle, 9 CCF ($58) in February billing cycle, and 8 CCF ($54.04) in March cycle, they would pay a total of $158.16 for those 3 months under correct billing procedures. But if their meter was only read at the end of those 3 billing cycles and they were charged for all 23 CCF at once, they would pay $189.72 for the same amount of water.

The audit finds the utility billed 2,528 customers for a period longer than 37 days in the month of December 2021 alone.

(Table 3 - Underwood Financial Consultants LLC)

Underwood’s team also found the Birmingham Water Works system is experiencing “a high number of implausible accounts,” or meter readings entered into the system that are so out-of-line with that customer’s normal history, that the system flags the account and doesn’t issue a bill until someone from the billing department can ask for a re-read of the meter and/or go in and manually adjust the account.

BWWB Implausible exceptional issues
BWWB Implausible exceptional issues(WBRC FOX6 News)

Underwood says these problems required the BWWB team to spend “A significant amount of time, effort, and money to adjust...the team averaged over 100,000 monthly transactions. There is clearly issues with the billing process that requires manual adjustments...these issues continued at least through the end of August 2022.”

Who’s to blame? The audit lays much of the responsibility at the feet of the utility’s management team, warning it “may not have been fully trained on certain aspects of SAP’s billing system which caused communication issues as well as inaccurate reports.” The audit goes on to say the SAP system can generate a report that shows all unbilled accounts, and running that report was standard procedure from the time the system was installed in 2016 until 2019 and would allow the utility to clear these “implausible” readings in 3-5 business days. But the review found the BWWB didn’t run that part of the report from November of 2021 through July of 2022 - calling this a “major factor that contributed to the backlog of unbilled account issues since the company may not have been aware of all unbilled accounts.”

BWW Mass estimation
BWW Mass estimation(WBRC FOX6 News)

Auditors found more than 500 cases from November 2021-July 2022 where the utility didn’t process “move-out orders” where customers moved from one location to another one - meaning these customers may have gone months before getting their final bill from their old location and delaying the billing of the new residents by months.

Underwood’s team says a major turnover in the billing department started in 2019 when a long-term BWWB employee was moved to the Customer Support Service Manager position - and within a few months the department consisted of new management and bill editing team employees who may not have been fully trained on how to operate the complex billing system.

How do you fix this? Underwood’s report recommends GM Michael Johnson and several of his top managers go through more external training on the billing system, recommends more training for the billing department employees, eliminating the practice of “mass estimation” of customer’s bills, changing the utility’s policies to fully use the information-gathering potential of its software system already in place but currently underused, and potentially hiring more outside consultants to review and improve the billing process.

You can view a PDF of the full executive summary of the audit below:

See more 6 On Your Side Investigates stories on Birmingham Water Works here.

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