Thursday, December 15, 2011

Port Authority Ignored Utility Undercharges For Years

The subject matter of this particular mess at the Port Authority is part of a lawsuit by the Port Authority against a now defunct company.

The company, Genergy, a utilities-management company hired by the agency to analyze energy usage, claims that it found that the Port Authority undercharged its tenants at area airports to the tune of millions of dollars every year because it didn't have working utility meters and couldn't account for all of its utility meters. Genergy conducted a partial audit of JFK airport and found that the Port Authority underbilled tenants to the tune of some $17 million in one year alone, and that the difference between energy received from Con Ed and what the Port Authority distributed to tenants was massive.
The massive discrepancies were uncovered after the Port Authority hired Genergy, a private, New York City-based utilities-management company, to perform an analysis on its electricity usage at its New York facilities in 2006.

The Port Authority buys energy from Con Ed, then resells at a profit to its hundreds of tenants.
Genergy quickly found that the PA consumed some 420 million kilowatt-hours but billed for only 250 million during fiscal year 2007, according to an April 2008 report obtained by The Post.

In hopes of finding where the missing energy was going, the Port Authority gave Genergy the go-ahead to audit meters attached to various tenants’ facilities at Kennedy.

Genergy began the painstaking process of examining and testing hundreds of meters — and found the source of the underbilling mystery.

Dozens of the meters in the preliminary audit were faulty, incorrectly calibrating the amount of electricity being used by individual tenants.

Companies with incorrect meters included British Airways, Delta Air Lines and Terminal 4, the company that manages the international facility, a source familiar with the audit told The Post.
The audit was never entirely completed, because Genergy and the PA had a falling out over billing in 2010.

But from that preliminary audit, the company concluded that the PA lost some $16.9 million a year at Kennedy because of the meter problems.
Genergy declared bankruptcy when it didn't get paid $2 million on the contract done with the Port Authority.

However, it's how Port Authority officials reacted to the news that makes a bad situation even worse for them (and for us).
When the agency was asked why it didn’t fix billing errors that led it to undercharge airlines at JFK Airport nearly $17 million a year, its reaction was no problem, we just overcharge for other stuff, the head of the company that uncovered the screw-up told The Post.

The shocking shrug-off came in a July 2009 meeting between PA brass and executives of Genergy, a utilities-management company hired by the agency to analyze energy usage at Kennedy, its president said.

Dario Gristina said he advised Christine Weydig — the PA’s deputy director of energy and environment programs — to quickly fix dozens of meters that were incorrectly calibrating energy usage at the airport, resulting in huge undercharges for tenants including Delta Air Lines and British Airways.

“Her reply was she checked with various departments and that was not a big concern because any shortfall they encountered in revenue they would make up in landing fees,” said an astounded Gristina.

Former Genergy executive Mark Williams said he was present at that meeting and backed up Gristina’s claims.

“We looked around like, ‘this is money you’re leaving on the table,’ ” he said.
The Port Authority denies those claims, and sued Genergy over failing to adhere to the contract terms.

What's lost in all of this is that if Genergy is right that the Port Authority undercharged its tenants by $17 million a year, that it should find a way to fix the problem so that the utility charges are properly imposed and can lead to reduced costs elsewhere (say for the landing fees or for consideration of a partial roll back of the recently imposed PATH fare hike or bridge and tunnel toll hike).

This whole episode shows the lengths to which the Port Authority ignored basic financial controls and fiscal management - figuring that it can simply generate more revenues by imposing higher fees or charges elsewhere to make up what it might be losing in other aspects of the Authority's operation.

The Port Authority has to clean up its books in a serious way, and needs to address the problems uncovered by Genergy; it's fiscally irresponsible to allow the situation to continue and the Authority can't assume that it will make up for such undercharges with fees taken elsewhere. The fees and charges should be related to the services rendered - and that hasn't been the case.

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