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Under New Jersey regulations the utility company has an obligation to periodically test the water meter. The maximum time between testing is 6 years. That time can be shortened under certain circumstances.
You have the right to file a complaint with the Public Utility Board to dispute the assessment of past water usage. It does not cost you money to file the complaint and you are entitled to a hearing to dispute the charges.
Contact the Board here:
You can find the New Jersey Code here (you want to look at chapter 14):
The formula for meter errors is found under § 14:3-4.6 Adjustment of charges for meter error .
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