A little over a decade ago, Gary Dye, then a gas measurement engineer at NW Natural, Oregon’s largest gas utility, lost faith in his employer to responsibly deal with what he believed to be systematic inaccuracies among the company’s hundreds of thousands of gas meters.
On a quest to tame these inaccuracies, in late 2011, he proposed a simple technical fix that he claims will “result in more accurate billing, extended meter lives, reduced landfill waste, and a more efficient utilization of [utility] personnel.”
Dye had other suggestions for how the company should operate. A few months later, he decided to file an internal complaint stating that he had been told “to discard a spreadsheet full of incriminating data that showed bad meter testing.” Ultimately, he filed 21 internal ethical misconduct complaints against colleagues and top executives, including current NW Natural CEO David Anderson, later elevating his concerns to the Oregon Public Utility Commission (OPUC), the body that regulates NW Natural.
Several months after he approached the commission, NW Natural terminated his employment.
Internal corporate documents and public records reviewed by DeSmog support several of Dye’s claims, including allegations that NW Natural executives downplayed or ignored employee concerns about billing accuracy issues associated with projects that facilitated extremely profitable energy market speculation.
In email correspondence to NW Natural and regulators in July 2021, nearly a decade after his termination, Dye raised fresh allegations that company practices and regulatory policies allowing utilities more time to replace inaccurate meters were resulting in insufficient customer reimbursements and unearned corporate profits associated with systematic overbilling.
Meanwhile, a version of Dye’s proposed solution to this problem has been adopted by several other utilities, including the country’s largest gas distribution company, SoCalGas, which received the blessing of California regulators in 2019 to run a pilot project that has continued and grown since then.
Late last year, following DeSmog’s repeated inquiries into Dye’s allegations, the OPUC re-opened a previously closed investigation into NW Natural’s gas meter testing program and billing practices. That investigation remains ongoing, according to agency spokesperson Kandi Young.
In addition, agency staff are currently weighing whether to expand their inquiries into the meter accuracy programs and “testing, correction and refunding processes” for all utilities operating in the state.
Faulty Meters Raise Questions About Profits
The gas meter on the side of a home or business represents the final toll station on a complex legal and economic network designed to deliver reliable, affordable, and safe energy to communities.
Similar to an electricity or water meter, gas meters measure the quantity of fossil gas that passes through them, recording usage and informing utility calculations of monthly customer bills.
Utilities regularly swap out equipment that falls below industry and regulatory standards, but at least 43,000 defective gas meters purchased by NW Natural in the early 2000s have contributed to a major spike in the number of meters requiring replacement in recent years, according to communications between the utility and regulators.
One of Dye’s complaints alleges that several NW Natural employees manipulated meter test data to obscure the installation of a batch of defective meters in 2009 — which remained in the field for seven years. Test result data reported by the company two years after Dye’s complaint included a group of 953 meters matching Dye’s description that were placed on the list to be removed due to accuracy issues. NW Natural did not reply to questions regarding whether meter test data was manipulated.
Dye further alleges that the company profited from defective meters in two ways: Meter inaccuracies resulted in customers being billed for more gas than they used, and utilities are also allowed to earn a return off replacing infrastructure, including meters. Most states don’t require reporting of meter testing data and customer billing figures, and investor-owned utilities like NW Natural have few incentives to disclose information that could negatively impact the bottom line of company shareholders.
According to DeSmog’s analysis of two different sets of company data from 2019 and 2019 through July 2021, approximately 95 percent of all excessively inaccurate meters ran “fast,” meaning they record overestimates of gas usage that translate to higher monthly bills.
What informed our analysis? See the data and how we crunched the numbers.
A NW Natural spokesperson opposed the notion that the company “has in any way inappropriately charged customers,” writing in an email that “NW Natural complies with our Commission-approved tariffs and rules.”
Those rules have been part of the problem.
Per OPUC regulations, NW Natural currently has four years to replace faulty meters, and, thanks to a June rule change, must credit customers for any billing inaccuracies during the period in which a faulty meter was in use. (Prior to that change, rules allowed utilities to reimburse customers only for 12 months, if the utilities could identify when a meter became faulty, or six months if they could not; the OPUC is currently reviewing NW Natural’s previous approach of only reimbursing customers for a six-month period).
OPUC spokesperson Kandi Young said that the recent rule change “ensures customers are not harmed by the extended time it takes NW Natural to replace the meter by making sure the bill is credited to reflect the accurate amount.”
In a report filed with regulators in March, NW Natural identified more than 50,000 installed gas meters that are at risk of exceeding a minimum accuracy threshold of 2 percent. The report also documented progress on removing inaccurate meters, identifying approximately 5,900 meters that had remained in the field in excess of two years, and more than 14,000 that had been on the list for over a year.
In a letter to the OPUC this May, NW Natural noted that once non-conforming meters are identified, the company “typically replaces those meters by December 31st of the year following determination of the need for replacement.” This leads to a wide range of replacement times; a meter tagged as faulty in January 2020 could be replaced as late as December 2021, nearly two years later, while one identified in December 2020 could be replaced within a year.
Prior to the June rule change, these extended replacement times mean that customers whose meters were running fast could have been paying for more gas than they were using. In July 2021, NW Natural Regulatory Compliance Manager Natasha Siores provided data to OPUC that showed that “from January 2019 to date, NW Natural has processed 9,218 bill credits for commercial and residential customers” whose meters were running fast. But questions remain about whether tens of thousands of other meters identified for removal and still in the field resulted in customers paying for more gas than they should.
A NW Natural spokesperson did not deny that the company has calculated customer bill credits using reimbursement periods that, in some cases, were shorter than the time it took for the company to remove these meters.
Repeated requests for information about average meter removal times and queries on whether the company tracks how long flagged meters remain in the field did not receive a response.
According to Young, OPUC staff are currently “weighing options to further refine expectations for meter accuracy, including opening an investigation into metering accuracy programs for all operators, which would be expected to explore all operators testing, correction and refunding processes.”
Company data also reveal that NW Natural has been removing and discarding millions of dollars’ worth of properly functioning gas meters for the last several years, due at least in part to the nature of the statistical analysis used to estimate meter accuracy. NW Natural doesn’t know exactly which meters in a given group are actually inaccurate until they have been tested, which usually requires removal and transport to a company meter shop. This has contributed to a backlog that has left inaccurate meters in the field for over two years in some cases.
Company data covering 2019-2021 shows that about one-fifth of all the meters removed, on average, failed accuracy tests. All removed meters are discarded, according to the company.
“Even though meters may test within parameters when removed from the field, from our experience, we also know that non-conforming meters get less accurate as time goes on,” an NW Natural spokesperson noted. “So it’s important to replace the non-conforming meters when the meter families they belong to are identified through our meter sampling program.”
However, Avista, a gas utility also operating in Oregon, reuses removed meters, and some, like SoCalGas in California, employ a technical fix that takes into account industry understanding of how meter accuracy declines over time, rather than remove meters.
NW Natural has also flagged for removal at least 36,000 defective gas meters purchased from the multinational conglomerate Honeywell.
In a July 27, 2021 email to OPUC, Siores confirmed that the company had secured a warranty agreement with Honeywell acknowledging an unspecified number of meters as defective. Siores also identified at least 7,500 defective meters from the manufacturer Sensus and noted at the time that a warranty agreement was pending.
“Neither manufacturer has acknowledged specific components or failure modes,” Siores continued, “only that the meters sold have become non-conforming within the warranty period.”
While utilities can’t earn a profit on some of the costs of doing business — such as fossil gas purchases and employee payroll — regulatory rules do allow them to earn a return on capital investments, like pipes and meters.
Related: Oregon regulators face challenges, old and new, to holding gas companies accountable during high-stakes energy system transformation.
About half the costs related to regular meter replacement include a return, or profit, according to NW Natural spokesperson David Roy.
During company testimony in support of its recently approved rate hike, NW Natural Senior Manager of Financial Planning and Budget Tobin Davilla noted that the company’s capital investment expense projections include “meter and regulator equipment cost trends” influenced by “replacements of faulty or outdated equipment.”
Whether utility customers will contribute to shareholder profits from replacing defective meters depends on two factors: first, how Honeywell and other manufacturers compensate NW Natural for the defective equipment, and second, whether NW Natural pursues a profit margin in addition to any replacement costs.
In one potential scenario, Honeywell could completely compensate NW Natural for the cost of replacing the defective meters. In another scenario, Honeywell could provide NW Natural a discount on the purchase of replacement meters — an expense passed on to customers along with added costs to cover shareholder profit margins.
Honeywell communications staff did not respond to questions about the company’s practices for addressing defective meters and whether it has been proactive in informing utility customers about the problem.
Citing a non-disclosure agreement, NW Natural declined to discuss details of any warranty agreements. When asked whether the company profits from replacing defective meters, a spokesperson said that testing and replacing meters “is not a key driver of revenue” and that “non-conforming meters identified for removal last year represented less than one percent of our net utility assets.” However, 1 percent might not be as small as it sounds: In the company’s latest rate hike request, it reported its net utility assets as $2 billion.
Young, the OPUC spokesperson, said that there is no rule requiring NW Natural or other utilities to notify regulators if there are issues with their meters. The agency is currently requesting additional data from NW Natural about its meter testing program.
The Cost of Unaccounted-for-Gas
Dye’s complaints also alleged that utility customers have been overbilled by millions of dollars due to misreported gas costs.
A DeSmog analysis of Dye’s claim, public financial reporting, and internal company data found that the utility could have been overestimating its gas costs by up to $4.3 million from 2002-2004. In response to questions regarding this analysis, a NW Natural spokesperson said, “We stand by our audited financial statements, and any prior ratemaking treatment of unaccounted-for gas from 20 years ago, as it would have also been reviewed and approved by the OPUC.” But neither NW Natural nor the OPUC provided access to key data capable of corroborating Dye’s allegations.
Current rules allow gas utilities to be compensated by customers for purchases of gas that is lost or otherwise unaccounted for. According to the OPUC, when this process is working as designed, “each core customer pays only actual gas costs, with no mark-up or profit for the company.”
One source of “unaccounted-for-gas” costs is gas that is released into the atmosphere during the course of business operations. A component of a meter known as a regulator, for example, periodically burps off gas to relieve pressure. Dye alleges in one of his complaints that not only was NW Natural in the habit of “venting gas to produce valid [rotary meter] test results,” but that there were also “pervasive attempts to conceal” this practice.
Another major gas utility, SoCalGas, changed its rotary meter testing practices in 2019 to minimize operational emissions by avoiding testing methods that vent gas, according to regulatory filings.
Lost or unaccounted for gas can also be explained by differences of accuracy between sophisticated and highly sensitive meters on major gas pipelines and the less accurate versions attached to homes and businesses.
Shortly after starting his job at NW Natural in 2000, Dye discovered that the company was losing less gas than it assumed, partly because of inaccuracies in how the utility accounted for variations in temperature and pressure across its service territory.
NW Natural acknowledged these “improvements in gas measurement and estimating” in its 2004 annual report.
According to one of Dye’s complaints, when he attempted to determine how these improvements were affecting the company’s bottom line, he was led to believe that unaccounted-for-gas costs were updated annually.
Later, the complaint said, Dye learned that NW Natural was filing a “historical” level of 1 percent every year, at times about double what the company had previously disclosed in annual reports to shareholders.
Dye’s complaint claimed that he let his director know “the gap between 1 percent and the real UAG would look bad,” but “management did not want to give up the earnings produced by the discrepancy.”
NW Natural did not respond to multiple requests for comment regarding Dye’s allegation.
That same year, NW Natural and other gas utilities applied for and received approval from the OPUC to create a definition of “unaccounted-for-gas” based on a five-year average, noting at the time that utilities had different methods of calculating annual gas costs because there was “no formula” defined by the OPUC.
Based on gas cost data in company SEC filings from 2002-2004, if NW Natural reported 1 percent unaccounted-for gas to the OPUC during this period, it would be overestimating its gas costs by $4.3 million. Exactly how much such an overvaluation might inflate final shareholder profits is unclear.
What informed our analysis? See the data and how we crunched the numbers.
NW Natural denied multiple requests for information about the figures it used in gas cost reimbursement figures reported to the OPUC during this period. The company also did not respond to questions regarding its recorded percentages of unaccounted-for-gas, although a spokesperson claimed that annual mechanisms for truing up gas costs prevent any over-billing or under-billing of customers.
However, the company’s 2004 annual report explicitly acknowledged that changes in unaccounted-for-gas estimates resulted in a $1.2 million profit margin increase for company shareholders in 2003. NW Natural did not respond when asked to provide an explanation for this discrepancy.
The company also declined multiple requests to make its CEO Anderson available for an interview or share details of its internal investigation into Dye’s allegations, including whether top executives were interviewed or made aware of the substance of the allegations.
A Sidelined Solution
From 2004 to 2012, NW Natural expanded gas infrastructure across Oregon while executives downplayed employee concerns about billing accuracy issues resulting from the incorporation of lower-quality gas into the company’s distribution system, according to internal emails obtained by DeSmog.
Sending that lower-quality gas out to customers opened additional storage capacity in the company’s network of underground wells near Mist, Oregon, which allowed NW Natural to expand speculative energy trading activities that have proven extremely profitable.
“Our interstate storage business, which has newly added capacity, remains a growth opportunity we expect to add significantly to our bottom line in the future,” wrote former NW Natural CEO Mark Dodson in a 2005 annual letter to shareholders.
According to residential ratepayer advocates, years of foot-dragging by NW Natural and the OPUC cost customers millions by delaying the pursuit of an independent analysis in 2017 that recommended shifting a larger portion of the company’s “very substantial” — and confidential — storage-related profits back toward NW Natural’s utility customers.
While utility meters measure gas throughput, customer bills are ultimately based on the total amount of energy used, which is commonly measured in British Thermal Units, also known as BTUs or “therms.” Dye oversaw the accuracy of NW Natural’s more than 700,000 meters from 2000 until 2012. During that time, interviews and written complaints revealed how he became increasingly concerned by what he alleges were repeated warnings from management to “conceal sensitive and potentially damaging information and statements,” from customers and regulators. Internal emails lend credence to these concerns.
“Do you/we have some sort of a plan for where all this really low BTU gas is going to go for the next few years?” asked Doug Tilgner, a manager at NW Natural, in a 2005 internal email. “I’d hate to think that we could get caught charging customers for 1040 BTU gas and be giving them 975 BTU (6% billing error),” he added, nodding at the fact that utility regulations allow “billing errors within a 2% threshold” but that errors outside that threshold would need to be addressed.
After Dye echoed Tilgner’s concerns that BTU measurement disparities would result in NW Natural exceeding minimum billing accuracy thresholds established by the OPUC, his boss stepped in.
“Gary, Doug – I’d like this particular e-mail chain to end here,” wrote Randy Friedman, who served as NW Natural’s director of gas supply until 2021. “I think you need to be more circumspect with language that could be taken out of context by a casual reader.”
In Friedman’s response to Tilgner and Dye in 2005, he explained that phrases the two had used in emails, like “I’d hate to think that we could get caught…” or “…one or more of our customers might discover this heating value error, and complain to us or the OPUC…” could lead to the impression that the company was not doing all it should to be accurate in its billing practices.
Five years later, Friedman would dismiss similar concerns expressed by Cliff Crawford, then NW Natural’s manager of system operations. This time, Dye himself would be involved in guarding the company’s internal dealings from outsiders.
In an email chain forwarded to Friedman by Crawford in 2010, Dye and a co-worker unsuccessfully attempted to divert West Linn Paper Co. employees away from the question of whether their bill would be adjusted to reflect the fact that they had been receiving lower quality gas over multiple periods in which the efficiency of their industrial boilers dropped by 2 to 4 percent.
Paper mills are energy-intensive operations, using large quantities of natural gas to dry paper. According to Bob Hart, the engineering manager for Willamette Falls Paper Co. and its previous incarnation, West Linn Paper, gas-related energy constitutes about 5 percent of the total cost of producing a ton of paper.
While taking a close look at boiler operations following a 2010 equipment upgrade, Hart noticed fluctuations in efficiency that could only be explained by lower-quality gas, and contacted NW Natural.
Behind the scenes, Dye and his co-worker debated about how much information to provide their customers about NW Natural’s billing practices.
“My only caution in giving this customer or any customer the full story is that we have many inaccuracies, shortcomings, budget constraints, etc. that we as a business have had to accept in our measurement and billing processes that only we experts in the business can fully understand,” Dye wrote to his coworker in 2010.
Before NW Natural terminated his employment, Dye’s fear of OPUC oversight led him to file internal reports about what he described as “a couple of things where we were doing things to try to evade the OPUC and not tip them off that there were some problems.”
When the agency requested a meeting to discuss questions it had about the company’s Meter Sample Program in 2005, Dye said he followed instructions to refrain from raising a number of known issues related to the meters associated with NW Natural’s larger commercial and industrial accounts, and OPUC didn’t raise any concerns about these issues either.
In an interview, Dye described how his attitude toward OPUC initially was one of fear and respect, but evolved over time.
“At the very end, I kind of realized, no, they’re not some bogeyman that is looking and trying to catch us or something,” Dye said, adding that he felt they were “dummies” who “didn’t seem to care.”
Still, Dye continued to push for change at NW Natural — and at OPUC — even after he was no longer at the company. In addition to blowing the whistle on what he considers unethical behavior, he’s also consistently advocated for a technical fix to the company’s meter-related woes.
Instead of discarding thousands of meters once a small proportion creep over minimum accuracy thresholds, Dye suggested adding a calculation, based on meter accuracy data the company already collects, to customers’ monthly bills. Utilities already use a variety of billing modifications to improve accuracy, including adjustments that take into account varying temperature, pressure, and gas quality in different parts of their service territories.
A NW Natural spokesperson said the company would “consider options like a calibration factor if we determined that it provided the most reliable, efficient, accurate and cost-effective results for our customers at that time.” But NW Natural did not respond when asked whether any concrete steps had been taken to make that determination since Dye originally pitched his idea to OPUC in 2011 while working as a NW Natural employee.
Meanwhile, several West Coast peers, including the country’s largest gas utility, have adopted programs strikingly similar to what Dye has previously proposed.
In 2019, the California Public Utility Commission signed off on a pilot program for SoCalGas that is similar to Dye’s original proposal. In August, the CPUC approved a request from San Diego Gas & Electric (SDG&E) to implement its own version of the idea.
Both utilities tout the idea’s environmental and economic benefits. Each time technicians replace a gas meter, they are required to “purge” two cubic feet of gas, according to a SDG&E filing. Instead of proceeding with the replacement of a group of 71,000 inaccurate meters the company has identified, the program would adjust customer bills to make up for the inaccuracies of those meters, thus avoiding 142,000 cubic feet of methane emissions in addition to other emissions associated with meter technician vehicle travel. Furthermore, SDG&E estimates their program will save customers about $7 million to $9 million over two years.
For its part, SoCalGas calculated that between 2019 and 2021, the program avoided emissions roughly equivalent to the town of Murrietta, California, releasing a month’s worth of gas used by the city into the atmosphere once a year.
In the past four years, NW Natural reports flagged over 100,000 meters for removal due to accuracy concerns. The company removes groups of meters, known as “families,” from service once it estimates that more than 10 percent are beyond minimum accuracy requirements.
NW Natural testing data provided to DeSmog shows that, on average, less than 20 percent of those removed meters ultimately fail accuracy tests, but 100 percent are discarded.
However, Avista, another utility serving the Pacific Northwest, takes a different approach. Between 1997 and 2010, it identified approximately 86,000 faulty meters. Rather than remove them, it applied a billing adjustment to those accounts. “This approach has provided accuracy for our customers and has been more cost-effective than replacing the meters,” said Avista spokesperson Casey Fielder. “Today, it costs approximately $300 to replace and install a natural gas meter. With the number of meters in the identified families, it is reasonable that the cost to replace these would have been over $10 million.”
That context makes it unlikely NW Natural will adopt a proposal similar to Dye’s absent pressure from regulators. But Dye’s cachet with both his former employer and OPUC has been virtually non-existent since settling a wrongful termination suit in 2013.
In an email, Young, the agency spokesperson, said that DeSmog’s analysis of meter removal costs “does not consider costs to the customer for alternative testing protocols.”
Young did not respond to multiple queries asking whether the agency has conducted its own analysis of the costs and benefits associated with Dye’s proposal compared to the status quo.
Dye has taken his grievances to the political arena, where he has made several unsuccessful runs for public office in Oregon, citing his background as a “whistleblower.” Criticisms of the corporate culture of NW Natural and OPUC oversight over the company feature prominently in his campaigns as a Libertarian party candidate, but some of the targets of his criticism are reluctant to directly engage with him.
At multiple points during the course of reporting this story, NW Natural and OPUC communications personnel implied that Dye represented a threat to their staff. One NW Natural spokesperson requested their name be withheld, and employees from both organizations discouraged DeSmog’s reporter from contacting individuals named in Dye’s complaints.
In October 2021, the Portland Police Bureau (PPB) received a referral from the U.S. Capitol Police after Dye made a post on a private social media page about “taking out eight NW Natural employees.”
“After looking into it our investigator quickly learned there was no nexus to terrorism,” said PPB Lieutenant Nathan Sheppard in an email. “Someone was concerned over workplace violence…but the concerns were determined to be unfounded.”
In an interview, Dye attributed the incident to a misguided attempt to raise eyebrows after smoking a little pot, and later recalled a story about the trauma he experienced during a 2012 family trip to see Santa Claus outside Portland on the day of the Clackamas Town Center shooting where two people were killed and another person was seriously injured when an assailant opened fire with an assault rifle.
Dye’s idiosyncrasies and specialized expertise in a niche technical field have left him with few allies in his pursuit of regulatory reform, but he remains undaunted.
“When the company made the decision that they were going to continue ignoring this stuff, and keep going on as they were, that’s when I gave up on the company and went down to the OPUC,” Dye told DeSmog.
Last summer, Dye met with OPUC Chief Administrative Law Judge Nolan Moser and DOJ Senior Assistant Attorney General Jason Jones regarding his ongoing allegations against NW Natural, according to internal agency emails obtained by DeSmog.
Both NW Natural and OPUC communications staff claim their organizations were unable to substantiate any of Dye’s claims, but have been unwilling or unable to produce any documentation or evidence supporting those determinations.
In September 2021, in response to press scrutiny and the absence of any documentation related to OPUC’s follow-up on Dye’s earliest allegations, Jones suggested OPUC leadership consider “reviewing the concerns anew,” according to an internal agency email.
“I may be paranoid, but worry that someone could say we have not taken the issue seriously without having access to [OPUC staff’s] review and conclusion,” Jones said.