After Submeterer Can't Evict for Unpaid Electric Bills, Bay City Metering Asks PSC to Revise Order to Allow Service Termination

An interesting petition was recently filed with the PSC by a submetering company, Bay City Metering, apparently as an agent of a landlord, 430 Realty Company LLC, seeking to modify a 2007 PSC Order allowing submetering of electricity at 430 East 86th Street in Manhattan, a 131 unit apartment building. Bay City Metering asks the PSC to grant it permission to shut off electric service when a tenant does not pay.

From a review of the Petition and the 2007 PSC Order, it appears the landlord attempted, without success, to follow a strategy recommended in a NYSERDA Manual on Submetering to circumvent the Home Energy Fair Practices Act (HEFPA) remedies for utility consumers. See PULP Network, PSC and NYSERDA Spend Millions for Submetering Projects Violating Residential Tenants' Rights, Jan. 16, 2009.

In essence, the NYSERDA manual suggests a scheme in which landlords deal with tenants who have unpaid charges for electric service simply by evicting them in summary proceedings in landlord-tenant court. The NYSERDA manual suggests this is how owners can avoid providing "burdensome" utility consumer protections to their tenants. Under HEFPA, several important protections are triggered by a notice to terminate utility service; for example, these include

• the right of the customer to avoid service termination through an affordable repayment agreement based on the customer's financial situation,
  
• notice protections for vulnerable customers, and
  
• required referrals of customers who have exhausted their HEFPA remedies to public assistance agencies for utility bill payment assistance.

Evidence that a landlord is trying to skirt HEFPA as suggested in the NYSERDA manual is a provision found in some leases purporting to "deem" charges for submetered electric service to be "added rent." Another telltale of the eviction strategy is language often seen in PSC orders granting permission to submeter, giving lip service to the principle that HEFPA applies, but also stating that the landlord will not terminate service for nonpayment. Indeed, the 2007 PSC Order which Bay City Metering seeks to amend on behalf of the owner has the following language:

The Applicant states that the building's management will not terminate electric service for non-payment of electric charges.... The Applicant certifies that the method of rate calculation, rate cap, complaint procedures, tenant protections, and the enforcement mechanisms will be incorporated in plain language in all current and future lease agreements.

Apparently, a funny thing happened on the way to the judicial forum. According to Bay City Metering's Petition, the owner attempted to evict a tenant for allegedly unpaid charges due for electric service, perhaps as "added rent" under a lease, but . . .

The court appearance with a housing court resulted in the judge stating that the housing court handles only the rental problems and informed the management representatives that this problem should be taken to the Public Service Commission.

This, of course, is no real surprise. New York judges who have grappled seriously with the submetering issue since 1930 have rejected efforts of landlords to evict residential tenants for nonpayment of utility service. See, for example,

• 8284 Corporation v. Garey, 137 Misc. 197; 242 N.Y.S. 413 (Municipal Court of New York, Manhattan 1930) (It is not a lawful business purpose for a landlord not incorporated as an electric corporation to provide electric service);
  
• Owners & Tenants Electric Co. v. Tractenberg, 158 Misc. 677; 286 N.Y.S. 570 (Municipal Court of New York, Manhattan 1936) ("Calling the charge for electricity rent does not change the nature of the transaction. Such a provision only arms the landlord with an additional remedy for the collection of the charges. The fact is the tenant buys electricity. He does not lease it. Indeed, under the lease, the landlord is not even compelled to sell electricity to the tenant");
• Related Tiffany v Faust, 191 Misc. 2d 528, 743 N.Y. S.2d 802, Appellate Term, 2d Dept 2002)
  
• Related Tiffany v. McConeyhead, (Kings Co. Civil Court 2004)
  

Most tenants, however, are not represented by counsel or, if they are represented, their counsel may not be aware of the separate system for regulation of all charges and disputes relating to electric service by the PSC. Also, in some cases, owners may have relabeled charges for electric service as unpaid "rent" in their eviction petitions, so judges may not be alerted to the underlying legal issues.

It remains to be seen if the PSC will cater to this landlord's request to modify the order. It can be argued that the PSC should not entertain the owner's petition to alter a significant part of the submetering order. The Order indicates that "No comments were received" during the 45 day SAPA comment period which preceded imposition of any charges for electric service. Tenants may have been induced to believe that submetering was benign under rosy or deceptive descriptions of the change when it was first proposed, and did not comment during the narrow SAPA notice period due to their reliance on incomplete information and a belief that their service would never be terminated over a payment dispute.

The online docket record for the case, No. 06-E-1391, indicates that a number of tenants did write to the PSC to appeal the submetering order, which had been routinely approved in April 2007 based on a PSC staff recommendation. The September 2007 appeals of the tenants were filed as petitions for rehearing, but apparently were not acted on by the PSC.

The Petition of Bay City Metering claims the owner complied with the PSC regulations on submetering, but does not mention whether the owner complied with requirements of the PSC's specific order that applies to the building. The PSC regulations mainly spell out what an owner must promise to do when it applies for permission to submeter, while the PSC submetering orders typically are more detailed. For example, they typically require creation of a revised lease agreement which creates and specifies the rates, terms and conditions of electric service and enforcement mechanisms. PULP believes such contracts or lease riders are essential to actually create the necessary contractual terms and conditions of service in the absence of any PSC-approved, filed tariff of the submeterer.

In the Order approving the application of 430 Realty Company to submeter, the PSC stated:

The lease agreement will summarize the information contained in the application to submeter. The Applicant certifies that the method of rate calculation, rate cap, complaint procedures, tenant protections, and the enforcement mechanisms will be incorporated in plain language in all current and future lease agreements. including the rate cap, method of rate calculation, and the HEFPA complaint procedures.**** The Owner will also disclose, as a component of the lease agreement, that a new §53 to the PSL took effect on June 18, 2003, imposing the requirements of PSL Article 2 on any entity that sells or facilitates the sale of electricity to residential customers.

The Petition contains a rather detailed description of a complaint procedure, but does not indicate whether the procedure described in the Petition is actually implemented and is included in all leases as part of the agreement for service.

Service termination is not the only way for an owner to collect from a tenant who has not paid for submetered service. If the owner has a valid contract containing rates, terms and conditions of service filed with and approved by the PSC, then the owner should be able to sue, like any other creditor, prove liability, and collect the debt if he can prevail over any defenses raised by a tenant. Also, as with any business, there is always some risk of nonpayment due to a variety of reasons, and there is no reason why the owner should not live with the terms and conditions it asked for when the order was first obtained.

Certainly, the PSC should require the owner to provide individual notice to each tenant regarding the petition containing accurate information about how the tenants may comment on the Petition before it is acted upon.

Before acting on the owner's Petition to amend the existing submetering Order, the Commission should conduct a review to determine if the owner has complied with it. This should include an inquiry to determine if the owner complied with all provisions of the prior PSC order before considering whether to grant the owner's request and allow termination of service. For example, the Commission should check whether the owner established valid service agreements for electric service in any lease rider or other binding document with all its terms and conditions filed with and approved by the Commission.

For more information, see PULP's webpage on submetering.