Friday, March 12, 2010

PSC Greenlights Eviction of Tenants for Nonpayment of Electric Bills

We previously discussed the problem that tenants who receive electric service from their landlords can be threatened with eviction, even if they pay the rent, when they protest charges for electricity or if they fall behind in payment of the electric bills due to unemployment or other household financial crises. Typical language in a landlord's boilerplate lease labels charges for submetered electricity as "added rent."

The use of eviction as an alternative to following the utility consumer protections of the Home Energy Fair Practices Act (HEFPA) is a recommended course of action contained in a NYSERDA funded submetering manual for landlords. The NYSERDA manual is co-authored by a frequent petitioner at the PSC on behalf of landlords seeking submetering permission, and an attorney from a law firm specializing in representation of landlords.

In a February 18, 2010 decision, the PSC addressed the use of eviction of tenants for nonpayment of electric charges without first following HEFPA. Tenants had objected to the use of eviction to collect electric bills, as part of their petition raising numerous grounds for halting the submetering of electric heat.
Termination of Service for Non-Payment of Electric Charges
Riverview II’s leases include a provision that purports to allow electric charges to be treated as “rent.” **** Riverview II responds that (1) the leases it uses are “DHCR leases” and “under the regulatory supervision of DHCR;” (2) Riverview II has never “evicted or attempted to evict” tenants for failure to pay electricity charges, and (3) it lacks the physical equipment that would be needed to terminate electric service to individual apartments.

Initially, we must note Riverview II’s claim it has “never” attempted to evict a tenant for non-payment of electricity is belied by the public record. The Department’s Office of Consumer Services, on August 3, 2009, directed Riverview II to stop up to 80 pending civil proceedings, all seeking tenant evictions based upon the tenant’s failure to pay electric charges. Riverview II Tenants Association attached to its Petition one such claim, dated August 11, 2009, in which more than $800 in “Electric Charges” were specifically identified as unpaid, thereby supporting eviction. Riverview II’s claim that the exhibit is merely a routine demand for rent contradicts a fair reading of the document.

Further, Riverview II provided no citation to the regulatory requirement that it use a specific lease or that the lease could not be modified to bring its provisions into alignment with HEFPA. ****
In this case, Riverview II . . . represents . . . that it will fully implement all of the HEFPA protections applicable to a tenant whose service could be terminated for non-payment before commencing any action or seeking relief from a court based on this non-payment. For these reasons, we will not apply in this case an outright prohibition on the treatment of submetered electrical charges as rent. Rather, Riverview II is ordered, in the event of non-payment of electric charges, to afford the tenant all notices and protections available to such tenant pursuant to HEFPA before any judicial action based on such non-payment is commenced. The HEFPA notices and protections that we require Riverview II to provide before any judicial proceeding commences, include, but are not limited to, deferred payment agreements as set forth in Public Service Law §37 and 16 NYCRR Part 11, budget and levelized billing plans as set forth in 38 September 17 Roosevelt Order at 34. Public Service Law §38 and 16 NYCRR Part 11, the complaint handling procedures as set forth in Public Service Law §43 and 16 NYCRR Part 11, and the special protections for medical emergencies, elderly, blind and disabled customers, and for cold weather periods as set forth in Public Service Law §32 and 16 NYCRR Part 11.
Although direct eviction attempts for nonpayment of electric charges, as the landlord had attempted, there is a simple, indirect path, charted by the PSC and its Office of Consumer Services, to accomplish the same result indirectly.

But like so many other aspects of the PSC submetering regime, the recent decision seemingly protecting tenants is likely to be ineffective and easily avoided by landlords. The key is the PSC's actual denial of the tenants' request for an "outright prohibition on the treatment of submetered electrical charges as rent," coupled with its clever language that only bars eviction for "this nonpayment," i.e., charges owed for electricity.

When the tenant pays the rent but holds payment for electricity, due to a dispute or inability to afford the charges, the owner may simply reallocate the intended payment for rent, so that it covers all the unpaid electricity charges. Presto! Nothing is owed for electric service, and "this nonpayment" does not exist. Thus the landlord believes it has no obligation to offer deferred payment arrangements, no need to notify tenants about public assistance and no need to offer the other HEFPA protections triggered when the customer owes money, because due to the reallocation of the rent payment, the customer is not behind in payment.

Then, the owner simply evicts for nonpayment of the balance of unpaid rent. There need be no telltale indications on the housing court eviction petitions of anything but unpaid rent.

This scenario is not hypothetical.

It is plotted in the NYSERDA submetering manual for landlords, and is acted out in practice at the Public Service Commission's Office of Consumer Services. When a tenant protests electric charges but pays the regular rent, and protests when the landlord tries to evict, here is what really happens: the owner applies the tenant's rent payment to electricity making it appear to the housing courts that the rent is unpaid, and the PSC Office of Consumer Services greenlights the practice:
This is in response to your complaint, Case Number ****** conceming Stellar Management Company (Stellar Management), your submetering company.

In your initial contact with the Public Service Commission (PSC) you indicated that you are disputing Stellar Management's assessment that your rent is in arrears. You are contending that the unpaid charges are not for rent, but for electric service.

While the PSC regulates submetering companies in issues related to energy services, it has no authority to mandate how a tenant's payment is dispersed. Stellar Management applied your payments toward your electric service, and not your rent. Therefore, your rent is in arrears.
Thus, in practice, the PSC, through its Office of Consumer Services (OCS), lets landlords allocate tenant payments intended to satisfy disputed or unpaid charges for electric service and evict for unpaid rent, even when the tenant pays the amount of the rent.

In sum, the recent PSC decision still allows deeming of charges for electric service to be rent, and it artfully bars only evictions for "this nonpayment" of charges for electric service. "This nonpayment" simply disappears when the landlord reallocates the tenant's intended rent payment to make the nonpayment for electric service disappear. As a result, the requirements of HEFPA, such as deferred payment plans and protection of customers from enforced payment of disputed charges, can still be circumvented, and the reallocation practice is greenlighted by OCS.

Like so much of the Commission's submetering regime, its orders professing to recognize customer rights and protections are unenforced and hollow in practice.

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