Friday, February 22, 2008

Residential Submetering Update

The Public Service Commission (PSC) requires submeterers who resell electricity to apartment dwellers to agree, as a condition of permission to submeter, not to charge more than the customers would be charged if they were directly metered customers of the utility, and to provide all of the protections of the Home Energy Fair Practices Act (HEFPA). Since posting our PULP website article tracking the history of residential submetering PULP has received several calls from tenants and tenant organizations raising serious concerns and complaints about the practices of submeterers. The complaints fall mainly into two categories:
  • Lack of price transparency which impedes submetered customers’ ability to determine whether they are being over-charged, and
  • Violations of Home Energy Fair Practices Act (HEFPA).
Submetering Promoted
The New York State Research and Development Authority (NYSERDA) promotes submetering as an energy conservation measure, citing studies that tenants in master-metered buildings with electricity included in their rent, consume more electricity than those in submetered buildings who pay separately for electricity. NYSERDA supports building owners recovering the cost of their submetering equipment investment by passing it through to tenants in a variety of ways, and it urges owners to offer submetered electricity at less than direct-metered rates, to induce residents to approve the conversion to submetering. See NYSERDA Residential Electrical Submetering Manual (Oct. 2001).

Also, rental apartment buildings where customers have received individual metered service from the local utility are often converted to submetering when the building is converted to a cooperative or a condominium. Here, the individual customer charges imposed by the local utility can be avoided, and there may be differences in the rates for service to the owner of the building, which may be provided at higher voltage and in a rate class other than residential.

The NYSERDA Manual contains some troubling advice to submeterers regarding the intended consumer protections contained in the PSC orders granted in connection with each authorization for submetering.
New York State has extensive regulations in place to protect residents against their electric service being shut off. An owner seeking to continue the tenancy while discontinuing the service will most likely be required to comply with all tenant-protection regulations applicable to utilities for discontinuing the service. These include various notice and payout [Deferred Payment Agreement] requirements and protections for the elderly and disabled, which are time-consuming, burdensome to the owner, and inconsistent with continuation of the rental tenancy. Moreover, special arrangements with respect to electric charges are likely to cause confusion in billing and collection procedures. As a result, owners may want to consider legal action for eviction of the resident or recovery of unpaid amounts as the primary enforcement mechanism for nonpayment of submetered electric charges.
Thus, the NYSERDA manual suggests that HEFPA consumer protections, such as the duty to offer negotiated repayment agreements to customers in arrears, can be avoided simply by evicting them or suing them in court for unpaid charges. PULP notes, however, that under PSL § 75 no court action can be maintained for charges for electricity that have not been "fixed" by the PSC, and the PSC does not "fix" submeterers charges. Also, in general, courts have held that tenants cannot be evicted in summary proceedings for nonpayment of utility charges. Still, the thrust of the advice in the NYSERDA manual -- for submeterers to avoid compliance with HEFPA -- is contrary to the expectation of the PSC, that submetered customers will be no worse off than directly metered customers. Those who are worse off as a result of submetering may be able to challenge it in court on the ground that only electric companies may sell electricity.

Price Transparency Problems
Public Service Commission submetering regulations prevent “charges to tenants from exceeding the utility’s tariffed residential rate for direct metered service. . . .” 16 NYCRR § 96.2(3). The problem, however, is that most tenants have no way to know whether they are being overcharged. Several factors make it difficult to compare the bills
  • Bills received from submetering landlords often fail to adequately explain charges for service
  • The utility supplying electricity to the building does not provide submetered customers information about what the charges would be if they were direct metered customers of the utility
  • Rate information for direct metered utility customers on utility websites is obscured in voluminous tariff leaves and separate monthly adjustment filings. Arithmetic calculations must be performed to adjust the posted rates for variations in "market supply" charges and "monthly adjustment clauses"
  • The PSC provides utility typical bill information only twice a year on a delayed reporting basis
Thus, even assuming that all submetered tenants have internet access and are conversant in English and mathematics, they are still virtually precluded from making a quick and meaningful monthly rate comparison between the utility rates and the rates being charged by a submeterer.

HEFPA Violations
Under Public Service Law definitions, submeterers are “utilities” for purposes of HEFPA (PSL § 53) and must provide all HEFPA protections to submetered tenants. In their zeal to shift electricity and submetering equipment investment costs to tenants, some submeterers have overlooked their consumer protection obligations.

In addition to complaints that submeterers' bills do not explain service charges in “clear and understandable form” as required by PSL § 44, PULP has received all of the following complaints:
  • Submetered customers are not being offered budget or levelized billing, in violation of PSL § 38(1)
  • Elderly submetered customers are not being offered quarterly payment plans, in violation of PSL § 38(2)
  • Submetered customers are not receiving annual notification of their HEFPA rights, in violation of PSL § 44
  • Submetered customers who require electricity to operate life-support equipment have not been identified, in violation of PSL § 65
  • Submeterers have not established complaint handling procedures, in violation of PSL § 43
  • Submetered customers have received termination notices that lack information required by HEFPA and that were not accompanied with information about Deferred Payment Agreements and possible availability of assistance.
In sum, building owners are ignoring specific requirements of PSC Orders granting submetering approval and the PSC regulations requiring compliance by submeterers with HEFPA.

The PSC’s attention to submetering in recent years has been largely limited to routine approval of petitions of building owners for submetering. As submetering approvals have increased, so have complaints against the practices of submeterers. It is time for the PSC to investigate the practices of submetering building owners to ensure their compliance with HEFPA and with the obligation to charge no more than the tenants would be charged if they took service directly from the utility instead of through the landlord. Submeterers should also be assessed their fair share of the Department of Public Service and PSC operating costs under PSL § 18-a, in return for their being allowed to operate as if they are utilities.

We also find it odd that NYSERDA, a state entity that administers the system benefits charge funded by electricity customers, would, in its submetering manual, describe basic compliance with state law provisions designed to protect those very rate payers (HEFPA) as “time-consuming [and] burdensome” or would tolerate the use of eviction rather than compliance with HEFPA “as the primary enforcement mechanism for nonpayment of submetered electric charges.” See NYSERDA SubmeteringManual, above, at p. 30.

In our view, HEFPA imposes no undue burden whatsoever upon submeterers who promise in their petitions to comply with HEFPA as a condition for PSC permission to engage in submetering that is otherwise unauthorized by law. See Campo v. Feinberg.


Joe said...

As a principal author of the NYSERDA Submetering Manual, I wanted to point out that at the time of the Manual's publication (Oct 2001), Buildings who submeter were not subject to HEFPA guidelines. This was instituted a few years later. The manual did provide guidelines for a dispute resolution process, which would now be superceded by the susequent HEFPA rules in many cases. The Manual could be updated or simply footnoted to indicate that HEFPA rules now apply to applicable portions.

Joseph S. Lopes
Applied Energy Group, Inc.

Gerry Norlander said...

Actually, official PSC regulations required submeterers to comply with HEFPA for many years prior to the 2002 amendments.

The 2002 statutory amendments rebuked PSC efforts to deregulate ESCOs and submeterers, and clarified that PSC orders approving different dispute resolution systems for complaints of submetered tenants, such as arbitration, which had been issued previously, could not substitute for the customer's statutory right to a decision by the PSC on a complaint under HEFPA, PSL section 43(2).