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Three years ago, nearly every household in Montana’s largest municipality got rebates for “franchise fees,” which the City of Billings illegally billed for years.

Now, Billings residents are pursuing another class-action suit against the city, alleging that a new water billing system has overcharged water users while the city has shut off water to houses while still not answering questions about the new billing system.

In a recent court filing, attorneys for the City of Billings argue regardless of the residents’ claims, the five residents who filed the suit — and any other resident — are ineligible for a refund or rebate because of a little-known and apparently little used rule requiring state residents to present any claims to a city council within one year of the claim arising. Attorneys Christopher Sweeney, Bryce Burke and Adam Tunning say that Montana law now bars the lawsuit, and they’re urging Yellowstone County District Court Judge Ed Zink to dismiss the entire lawsuit.

At the heart of a case was a rocky rollout of a new software system Billings implemented because the old one was antiquated and beyond its useful life span. None of the residential meters were changed during the process, but residents were left with sticker shock as the new software seemed to show a huge uptick in water usage and rapid increases in water bills. Each of the five plaintiffs in the lawsuit — Jeremy Chapman, Kailey Ferguson, Edward Johnston, Nancy Thorson and Gary Zaccagnini — submitted their bills in court documents to prove the billing issues.

For example, Chapman’s water usage from December 2023 through June 2024 was between 1 and 7 kilogallons (a kilogallon is equivalent to 1,000 gallons and is abbreviated as “Kgal”). Chapman’s bill ranged from $40.96 to $62.89. However, after the new billing software, his usage went to 73 Kgal for a two-month period, with a resulting charge of $501.94. In October 2024, city records show he used 78 Kgal and was billed $593.75.

Ferguson’s usage from May 21, 2024 through Aug. 5 was 10 Kgal during the period of 76 days, and she was billed $240.80 for it. But after the new software was implemented, Ferguson received a bill showing that she had used 245 Kgal in October 2024 and received a bill for $2,509.79.

The City of Billings received so many complaints it launched its own audit after the new system was implemented in the summer of 2024, and stopped any water turnoffs while city officials sorted through the confusion and displeasure. According to court filings, though, the city says the audit found the software and monitoring was working properly. The city has argued planned water rate increases coupled with a very hot summer — which is when the transition happened — led to a nearly 30% increase in water usage for the entire city.

Still, residents in the lawsuit contend their water usage did not change — despite bills showing their water usage dramatically increased, in some cases tenfold.

Chapman said he contacted the city because he disputed the bill and did not pay his bill because he believed it was erroneously calculated. The city shut off his water on Feb. 2, 2026. Ferguson said her water bills were so excessive that she was forced to move from the rental property.

Both the city and the residents agree that the residents did contact the city, and all the residents alleged the billing was improper. However, attorneys for the city say all the residents failed to object to the bills within a year of when the bills were issued, and that state law requires residents to file a claim in writing with the city clerk and itemize a bill, demanding the city council pay it.

According to the the United States EPA, the average American uses around 82 gallons per day in a household.

The residents also claim the city knew about the problem — alleging the city fielded thousands of complaints — and that the audit was severely lacking.

“(The City of Billings) refused to acknowledge the possibility of system errors despite thousands of simultaneously requests to review bills from plaintiffs and other Yellowstone County residents,” the court documents say. “(The city) hired a firm to conduct an ‘audit’ which failed to review the homes of the plaintiffs. The audit reviewed less than 30 meters and failed to explain how residents were charged for more water than they could use in a month.”

The audit also found the city had inappropriate operating procedures, inadequate staffing, and a “rushed conversion process,” according to court documents.

“(The city) had various excuses for illogically high or impossible bills, such as there was a leak, the sprinkler system must have been running nonstop, the sprinkler system was leaking and someone was stealing water,” the residents said. “These excuses were easily disproven.”

The residents also said they had tried to work with the city to understand the bills and come to a resolution before filing a lawsuit.

For example, Chapman claimed he requested different water statements and billing, which he did not receive until Feb. 1, 2026 — the day before the city turned off the water. In another example, the city allegedly told Thorson her increased bills were due to a underground sprinkler system. She does not have one at her home.

Attorneys for the city said the state’s year statute of limitations makes sense because it gives the city a chance to investigate the claims and address problems before they add up.

“The purpose of the claims statutes is not to prevent surprise, but to provide the public entity sufficient information to enable it to adequately investigate claims and to settle them, if appropriate, without the expense of litigation,” the city’s attorney said.