Utility Bills – How The Customer Is Cheated and Pay Higher Amount

A few months back there was an interesting study published in one of the business newspapers. It was related to how much an Indian household spends under various heads like Education, Grocery, Transport, Mobile, Utility Bills like Electricity, Water, Gas etc. As expected, Grocery was No 1 with 34% share followed by the transport at 15%. Quite surprisingly, utility bills ranked no 3 with 12% money spent.

After reading this study, i calculated my household expenditure under each category. It was more or less matching with the study except for utility bills. My utility bills were contributing 20% of household expenditure. It was too high. Personally, i ensure that there is No Wastage of Water and Electricity in the house. In this post, i will not give you a lecture on how to reduce electricity usage i.e. switch off all the lights, replace bulbs with LED etc or use less water. Also, i will not discuss reasons like faulty meter, consumption pattern etc. This post is all about how the customer is cheated and pay high utility bills without any increase in consumption/usage.

Normally, FMCG companies cheat customers but now you have to deal with utility service provider also :) . The best part is that most of these utility bills were generated by Govt departments, therefore, no one doubts any foul play. In some big cities, you have private power utility companies. To fix my issue, I tried everything from test meters to inspection by professional. Finally, the reason found out by me for high utility bills was quite surprising. In my opinion, it is like cheating customers. Before that, i would like to highlight the slab based billing of utility bills.

Slab Based Billing of Utility Bills

The reader’s who keep a tab on business news must have read about claims of various states that they are providing electricity or water at cheapest rates in India. It is not true. The reason being, states quote the rate in the lowest slab. Let’s take the case of electricity. I read that the electricity tariff in state A is Rs 3 per unit. Going by this logic, if the consumption is 500 units then monthly electricity bill should not exceed Rs 1500 excluding taxes. The fact of the matter is that the electricity bill excluding taxes is approx Rs 3500 i.e. more than double.

The reason being, electricity is charged slab wise and so as water. The only exception is gas where the per unit cost is fixed irrespective of usage. In some states, the previous month’s usage decide the next months unit wise slab. It is too much. In the example shared, the Rs 3 per unit is applicable only for the first 30 units that are also called lifeline consumption. In the highest slab, the charges can be as high as Rs 12 per unit i.e. more than 4 times the basic slab. In other words, Govt incentivizes you to use fewer resources and pay more for more usage.

Utility Bills – How The Customer Is Cheated and Pay High Bills

Now let’s check how the customer is cheated and made to pay high utility bills without incremental usage/consumption. The department plays a smart trick that goes unnoticed. For reference purpose, i am taking a hypothetical data points to avoid any court case against me :) but it is based on three different real instances including mine.

Consider a person X i.e. You who is staying in State A consumes average 20 units of power daily. Thus your monthly consumption is 600 units. In state A, the power consumption slabs are as follows

Up to 200 Units: Rs 3 per unit

From 201 to 400 Units: Rs 4 per unit

From 401 to 600 Units: Rs 6 per unit

From 601 to 800 Units: Rs 8 per unit

More than 800 Units: Rs 10 per unit

Now for the consumption of 600 units, your monthly bill should be Rs 2600 excluding taxes. So far so good and No problem till this point. You must be wondering where is the question of cheating?

The bill of Rs 2600 is based on assumption that meter reading is recorded on a fixed date of the month i.e. on 1st of every month. Therefore, the bill is generated from 1st to 30th/31st of the month.

Assume next month because of some XYZ reasons, the reading was taken on 7th of the Month. The no of units consumed will be 740. The monthly bill will be Rs 3720 excluding taxes instead of Rs 2600. In other words, Mr. X i.e. you have to pay Rs 1120 extra. Additional 140 units above the average monthly consumption of 600 units will be charged at Rs 8 per unit i.e. Rs 2 per unit extra.

You will say what’s the big deal, in my next month’s bill, i will only pay for 460 units assuming next bill will be generated on time i.e. 1st of next month. Your next month’s bill of 460 units will be Rs 1760. You will be very happy and rejoice.

Hold ON, Before you celebrate kindly note that you are being cheated

Assuming for the 1st month if the meter reading would have been taken on scheduled time i.e. 1st of next month. In this case, you would have paid Rs 2600 instead of Rs 3720. Therefore, you paid Rs 1120 extra for the 1st month.

In the 2nd month, you paid Rs 1760 instead of Rs 2600. Therefore, you saved Rs 840.

In short, you paid Rs 280 EXTRA (Rs 840 – Rs 1120) for same consumption both the months and You are being cheated by the utility service provider.

To explain it differently. Assuming both utility bills were generated on 1st of the month then your total bill would have been Rs 2600 X 2 = Rs 5200. In reality, you paid Rs 3720 + Rs 1760 i.e. Rs 5480 i.e. Rs 280 Extra.

The best part is your consumption remained the same i.e. 600 units but without any incremental consumption you paid Rs 280 Extra because of a small trick played by the service provider. 

Now this is not applicable in all cases but assuming it works for just 5% or 1L connections in a big city. Considering a population of 1Cr with 20L households (Avg 5 members each). The department pooled cool 280L or 2.8Cr additional revenue without any incremental consumption of power or efforts. If the department applies this trick during the month of high consumption then net profit through cheating can increase manifold.

Government Department Indulge in Such Practices, I don’t believe this?

It is possible. The govt departments have targets to achieve. Recently, one of the news that went unnoticed was how income tax department slapped a demand of Rs 10,000 Cr against one of the PSU banks on last working day of the Financial Year for short payment. The next day (which falls in the next financial year) a rectification order was passed and a refund of Rs 9,500 Cr was issued. It was done only to achieve revenue collection target for the financial year. To check this news, Click Here

If a demand of Rs 10,000 Cr can be raised one day and refund of Rs 9,500 Cr can be issued next day then i am only talking about just Rs 280 per customer on an average :) In all probability, such tactics are used to achieve the revenue targets. Though it is not done on regular basis but i observed this phenomenon once every quarter.

In my case, the utility bills are generated on later dates but the date of the bill remains the same. You must be wondering how can i prove that. Though it is very difficult. I cannot say that if the utility bills are received late, it means they are generated post scheduled date i.e. 1st of the month. Moreover, recording of meter reading is manual exercise and there is no proof of reading on 1st of the month.

The logical way to prove is when the bill is presented for payment to your bank. The amount is debited automatically through online banking transaction. I have subscribed to Bill Payment service of one of the PSU Banks. If the bill is generated on 1st of the month then it is presented to the bank on or before 4th of the month and i receive an alert same day. This month i received an alert on 10th so you know this quarter’s revenue targets are achieved. The officials must be partying on the successful achievement of revenue/collection targets. In my post on habits that are wealth destroyer, i mentioned delayed EMI’s and delayed utility bills payment can destroy wealth in long run. Though it might be a small amount but cumulatively, it is burning a hole in my savings because of NO Fault of mine. Moreover, i am not here for charity.

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