Hazel Towers Tenants to Receive $20,000 Credits of Landlord's Overcharges for Submetered Electric Service

Tenants at Hazel Towers, a former Mitchell-Lama housing project in the Bronx, will receive electric bill credits of more than $20,000 to correct overcharges for electric service provided by their landlord, Nelson Management. The landlord was granted permission by the PSC to submeter in 2001, and implemented it in 2007 after receiving NYSERDA grants to underwrite the cost of installing the submeters. The tenants complained of overcharges in a June 4, 2008 complaint to the New York PSC's Office of Consumer Services, and sought to halt submetering.

In May of this year, when no action had been taken on their pending complaints, the Hazel Towers Tenants Association petitioned the PSC to take action in the case. Hazel Towers Tenants Ask PSC to Act on Submetering Complaints, PULP Network, May 6, 2009. Comments in that proceeding have been filed. See Hazel Towers Tenants File Reply to Owner's Request to Dismiss Petition Seeking to Halt Submetering, PULP Network, August 18, 2009.

Subsequently, OCS made its initial decision on August 21, 2009. The OCS made these findings

• A total credit of $20,392.64 plus interest charges ... will be issued to the tenants accounts in the near future for overcharges ... in comparison to the direct metered rate as stipulated by the Commission Order.
• Nelson Management charged a late payment fee of $25.00 instead of ... 1.5% per month.... American Metering and Planning Services (AMPS) was informed that any late payment charges assessed cannot exceed the 1.5% per month cap. Nelson Management has stated that the late payment charges are not being billed and any prior fees that were applied are being removed from tenant's accounts.
• Nelson Management's termination procedures are not in compliance with the Home Energy Fair Practices Act (HEFPA). Termination efforts are not in compliance with the Commission Submetering Order and have been withdrawn.
• Staff advised Nelson Management that it would need to incorporate the notification of low-income tenant billing in the "Notification of Rights and Procedures" to all tenants.
• Staff found that the original annual notification [of HEFPA rights] is not in compliance with the language contained in the approved Commission Order.... Staff found that these customer rights were distributed in 2008, well after submetering began.

At best, the $20,392.64 that will be recredited to tenants is a remedy for charges that exceeded what Con Edison would have charged a direct service customer through 12/03/2008. With interest, refunds of the overcharges to submetered tenants exceeded $35,000.  But significant issues still remain concerning the audit of charges and the methodology used for determining submetering charges. Under the PSC Order allowing submetering at Hazel Towers,

the "[r]ates and charges paid by the tenants will be based on the actual costs ... [and] in no event will the total charges (including any charge for billing) exceed the Con Edison residential rate for direct metering."

In its more than one year of investigation, the OCS did not conduct its own audit of books and records to determine if the owner properly calculated charges. Instead, the OCS initial determination relies on the owner's self-reported admissions of overcharges in excess of the Con Edison rate, in selected months, through 12/03/2008. This may seriously understate the magnitude of overcharges. For example,

• Did the landlord mark up the cost of service but stay below the rate cap in some months?
• Has the landlord selectively omitted some months of overcharges in excess of the rate cap?

Indeed, OCS acknowledged in another case that one of the Hazel Towers tenants was overcharged by $325.42 -- yet the partial data from the landlord OCS now relies on in the Tenant Association case shows only $95 in overcharges to that same tenant over the same period, indicating a very substantial "misunderestimation" of overcharges. If that case is typical, the actual overcharges could be more than three times the amount that has been acknowledged to date.

The OCS initial determination rejects the request of the Hazel Towers Tenants Association to halt submetering and to refund all charges until valid lease arrangements are made and full compliance with HEFPA and other conditions of the submetering Order is achieved. The determination basically allows the landlord to continue submetering even without valid agreements or lease riders for electric service in place. A new lease rider now being proposed by Nelson Management is attached to the OCS initial determination. Apparently written with ex parte collaboration of OCS, it does not contain clear provisions on how the electric bills are calculated. Under the Order allowing submetering at Hazel Towers, agreements for electric service were required to have been phased in with lease renewals. The Order clearly states

The electricity charges and concurrent rent reductions will go into effect for each such apartment upon the expiration of the current apartment lease.

There was no proper Commission-approved lease rider establishing terms and condtions of electric service for any tenant when submetering began at Hazel Towers, and the problem still has not been remedied. In addition, the proposed new rider attached to the OCS determination lacks provisions required for transparency, such as

• An Annual report to the PSC with copies to tenants,
• An independent audit of electric service charges and compliance with PSC rules and orders,
• An opportunity for tenants to inspect books and records to check whether the landlord is overcharging, and
• Revision of the rent to comply with DHCR rent reduction rules. Instead, the lease rent is not changed and a credit equal to the DHCR rent reduction is given on the bills, apparently so the landlord can apply future percentage increases allowed by the Rent Guidelines Board to the old, higher rent that included electric service, rather than to the revised rent amount.

Also, the new HEFPA information materials issued by the owner, and attached to the OCS determination, were apparently designed by the owner with the collaboration of OCS staff. These still may not fully satisfy all HEFPA requirements. For example, under HEFPA regulations, the notification of HEFPA rights for service to customers in the Bronx is required to be provided in both English and Spanish, but this apparently was not done.

Thus far, the clear lesson of this case seems to be that landlords may disregard with impunity all provisions of a PSC submetering order which relate to tenant-customer protections. If and when tenants complain, submeterers can address violations at their leisure in ex parte communications with OCS.

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Update
The PSC issued its final decision regarding complaints about submetering at Hazel Towers in 2013, nearly five years after tenants first complained.

See PSC Warns Landlords to Follow Submetering Orders Allowing Sale of Electric Service to Residential Tenants

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