Thursday, February 12, 2009

Submetering Slowed at Roosevelt Island

Temporary Stay of Submetering Conversion at Roosevelt Island and Three Other Locations
As reported in the New York Times on Monday, a PSC-approved electric submetering project on Roosevelt Island ("Roosevelt Landings," an apartment complex formerly known as Eastwood) threatens to harm many low income tenants. Some Tenants Face an Unfamiliar Squeeze on Their Pocketbooks: An Electric Bill. The landlord's application to resell electricity from Con Edison and to become the monopoly provider of electricity to tenants was approved by the PSC in a November 12, 2008 Order.

As a result, responsibility for paying the bills for expensive, inefficient electric heating fixtures in poorly insulated apartments is being shifted from the landlord to the tenants while giving small rent reductions far exceeded by the anticipated cost of electricity. See Are Eastwood/Roosevelt Landings Enormous Submetered Electricity Bills Fault of Careless Tenants Or Inefficient Urban America Heating Equipment?

For a magnificent photo of some of the affected tenants, many of whom cannot afford the higher charges, click here.

On February 12 2009 the Chairman of the PSC, whose nomination for a six-year term is awaiting State Senate confirmation, issued a one-commissioner Order Staying Permission to Submeter, granting a motion for rehearing and supplemental request made on behalf of tenants by State Assemblyman Micah Kellner and other federal and city elected officials, temporarily staying implementation of the submetering order previously issued by the five-member commission, stating:
pursuant to this stay, the Owner shall not utilize the submetering system to measure electric service and shall not charge tenants for submetered electricity unless and until authorized to do so by a further Commission order. The Commission will expeditiously review the petition for rehearing and interested parties should file comments thereon.
Similar orders were issued simultaneously involving three buildings at other locations. The orders require the owners to provide to each tenant a copy of the PSC order, and to file proof that has been done with the PSC by February 27, 2009. It is anticipated that notice of the rehearing will be published soon in the State Register and that there will be a normal 45 day public comment period after publication of the notice.

Rationale for the Stay
The one-commissioner order suggests that the Commission may have been unaware, when it issued an order waiving its regulations against submetering in November 2008 that
  • heating bills are being shifted to tenants
  • the tenants have low incomes
  • the charges for electricity are not offset by commensurate reductions in rent
  • the premises and fixtures are not energy efficient
  • charges for electricity are deemed to be "additional rent," subjecting tenants to eviction for nonpayment of electricity charges
  • the landlord's grievance procedure may subtly evade the requirements of the Home Energy Fair Practices Act (HEFPA) by channeling disputes over electricity charges to eviction proceedings instead of to the PSC for decision.
Dodging HEFPA
Through assistance programs and exercise of HEFPA rights, such as the right to a deferred payment plan if one falls behind and is threatened with termination of service, most customers behind in payments to their utility can avoid termination of service. But by approving landlord submetering applications that say electric service will not be terminated for nonpayment - seemingly benign - the PSC actually prevents needy tenants who simply lack the means to pay their electric bills from getting affordable repayment plans whose terms can be reviewed by the PSC, and prevents those who lack the means to pay utility bills from receiving any assistance under Social Services Law 131-s and the Emergency HEAP programs, programs designed to stop termination of service.

The PSC submetering regime allows landlords to avoid many HEFPA requirements that spring from termination notices, for example,
  • requirements under Section 37 of the Public Service Law (PSL) to offer a negotiated payment plan to a customer in arrears,
  • notice protections to vulnerable elderly and disabled customers under PSL 32,
  • medical emergency protections under PSL 32,
  • third party notification to relatives or others under PSL 40 to protect customers who may not be literate or who may lack capacity to understand there is a problem regarding payment, and
  • the critical opportunity for a customer under PSL 43.2 to resolve disputes over bills and deferred payment agreements administratively at the PSL 32, before adverse action is taken by the utility provider. The PSC procedures are available by telephone, internet, or letter, or appearance, without the need for a lawyer. The process is far more customer friendly than landlord tenant eviction proceedings, which require court appearances and can culminate and a court eviction order that gives only five days for all arrears to be paid.
As we have previously pointed out, the NYSERDA manual on submetering (written by a landlord's consultant) instructs landlords to avoid the botheration of "burdensome" requirements of HEFPA that protect vulnerable customers. NYSERDA's publication instead suggests that the landlords simply evict tenants behind in payment of electric bills rather than offer deferred payment plans and providing other protections triggered by HEFPA. See PSC Authorizes Millions for Submetering Projects Violating Residential Tenants' Rights.

Over the past decade the PSC attempted to avoid its statutory duty under PSL 43.2 to decide customer complaints regarding the new utility service providers it promotes, such as ESCOs and submeterers. The avoidance of HEFPA complaint handling procedures by submeterers may involve subtle cooperation and unwritten practices at the PSC. We surmise that the following practices may exist:
  • Although the PSC submetering orders routinely acknowledge that HEFPA applies, the orders also include or approve external grievance procedures and lease provisions that route tenant complaints over electric charges to the landlord tenant courts or arbitration, via PSC-approved lease provisions which "deem" the electric charges to be "rent."
  • The PSC Office of Consumer Services generally does not accept a complaint if the customer has not first pursued his grievance with the utility, and so bill disputes and nonpayment issues involving submetered customer are steered back to the landlord - and thus to the court process contained in the landlord's grievance procedures. (We are aware of no reported PSC consumer complaint determinations involving submeterers, also suggesting that tenant complainants are being told by the PSC to pursue the landlord's grievance procedure which shunts the tenant complaints to court or arbitration, an option which itself may chill a tenant's interest in complaining).
  • If the customer complains to the PSC during the landlord's grievance process, the PSC Office of Consumer Services may refuse to hear a complaint that is or was the subject of a court proceeding or arbitration. (This has occurred, for example, a customer seeks the assistance of the PSC hotline to work out a payment plan, or alleges a HEFPA violation, or medical emergency, after the landlord has commenced a replevin proceeding in court).
  • Notices to tenants approved by the PSC and required to be put into lease language only vaguely mention that tenants may contact the PSC. The actual language used in the leases and tenant education materials fails to inform tenants of their right to have a dispute over charges or a payment plan adjudicated by the PSC under PSL 43.2 and the Commission's complaint handling regulations in 16 NYCRR Part 12. As a result, tenants may be unaware of any opportunity to initiate a complaint with the PSC that will be decided by the regulatory agency. When the other option is court proceedings, the complaints may simply be stifled.
In the past when challenged on a similar submetering order, the Commission backtracked slightly, but asserted that it had no jurisdiction regarding lease provisions deeming electric charges to be additional rent. See the PSC 2005 order in the Ebbets Field case where the Commission stated:
As to the concern that if a tenant does not pay his or her electric bill, the landlord would have the same recourse against the tenant as if the rent were not paid, we do not regulate the provisions in lease agreements between landlords and residential tenants. HEFPA would, however, apply and before the Owner could disconnect the tenant, it would have to adhere to the procedures required by HEFPA
Deeming Electric Charges to be Rent
The Roosevelt Island landlord's application to waive the general prohibition against residential submetering plainly states at page 6 that the electric charges shall be "deemed added rent." Prior PSC orders expressly allowed submetering landlords to evict tenants over unpaid rent, in lieu of termination of service, the statutory process governed by HEFPA and ostensibly by the PSC. For example, the PSC stated in a prior order allowing submetering in a Brooklyn apartment building:
The applicant certifies that the building manager will not terminate electric service to tenants for non-payment of electric charges. * * * * Failure to pay electricity will be treated the same as failure to pay rent and the landlord will have the same rights as if the rent was not paid.
Indeed, in the last year the PSC issued at least 13 submetering orders (including the four stayed yesterday) in which it approved deeming of electric charges to be added rent. This, coupled with saying service will not be terminated for nonpayment, is an essential element of the displacement strategy recommended in NYSERDA's manual.

Of course, when the landlord eschews termination of service many HEFPA protections are inapplicable and public assistance and emergency HEAP are unavailable to low-income tenants. If the PSC allows deeming of electric charges to be rent, (as the landlord applications and PSC orders typically provide), then the pathway to displacement of low-income tenants is cleared.
Legislative action to prohibit landlords from deeming charges for utility service to be rent may be needed. In their roles as a monopoly utility, landlords should not be able to use a remedy for nonpayment that is not available to utilities under the public service law.

Little or no effective regulation is being exercised by the PSC once a landlord is granted permission to sell electricity to tenants. PULP pointed to HEFPA circumvention problems in other submetering complaint cases still pending at the Commission without resolution for many months, where the landlord retained the law firm of a former PSC Chairman. See Lax PSC Enforcement of Submetering Orders Allows Landlords to Overcharge for Electricity Sold to Tenants and to Circumvent HEFPA Protections. Also, the PSC in November 2008 started a generic proceeding to "streamline" approvals for landlord submetering which, if adopted, may drop utility tariff prohibitions on submetering and delegate submetering applications for routine approval by its staff, without published commission orders for each conversion. See PSC to Hold Technical Conference on Electricity Submetering Issues; Submetering Technical Conference Postponed to January.

The submetering regime created by the PSC typically involves alteration of tenant leases seemingly to bar access of the tenants to regulated electric service from the traditional utillity or from alternative suppliers. There are fundamental policy and legal issues involved in allowing landlords to become the monopoly provider of electricity to their captive tenants. Longstanding statutes forbade landlords from requiring tenants to purchase commodities (fuel, ice) that are available elsewhere only from the landlord's designated supplier. Also, it is unclear whether sections of the Public Service Law (other than HEFPA) that apply to electric companies affect submeterers. Under the statutes, the only exception allowing a landlord to sell electricity to its tenants is when the landlord is a railroad.

For more information see PULP's website page on submetering.

Feb 13, 2009 -- NY Public Service Commission Grants Emergency Stay of Urban America's Eastwood/Roosevelt Landing Central as Electricity Submetering Charge Increases, Roosevelt Islander

Submetering Stay for 4 Electrically-Heated Buildings (not ours), Central Park Gardens Tenants' Association.

Feb. 15, 2009 -- State Freezes Plan to Have Tenants Pay Electric Bills, NY Times.

Feb. 23, 2009 -- PULP Files Comments on PSC Proposal to Relax Submetering Rules, PULP Network.

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