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Utilities, Submetering

Postby TenantNet » Sun Mar 14, 2010 12:45 am

PSC Authorizes Millions for Submetering Projects Violating Residential Tenants’ Rights
from http://pulpnetwork.blogspot.com/2009/01 ... ering.html

Background: The PSC-Imposed System Benefit Charge

In 1998, implementing its "vision" to restructure New York’s electric utilities, the Public Service Commission eliminated utility-funded demand side management programs and established a new third-party system for delivering energy efficiency measures funded at a reduced level by a "system benefits charge" (SBC). The SBC is an additional amount billed to each utility customer, "to ensure that certain public-benefit programs formerly provided by regulated monopoly utilities would continue in a partially deregulated environment." See, Order Continuing the System Benefits Charge (SBC) And the SBC-Funded Benefit Programs, In the Matter of the System Benefits Charge III, Case 05-M-00090 (Issued and Effective December 21, 2005) at p. 5. .

When the SBC was established in 1998, the charge to ratepayers ranged from 0.85 mill to 1.0 mill per kWh. See, SBC History 1996-1999. A "mill" is 1/1000 of a dollar, or 1/10th of 1¢. Typical electric bills of the major utilities bills posted on the Commission’s website reflect a current monthly SBC charge for residential customers ranging from 31¢ to 90¢ per month, for customers consuming 500 kWh, depending on which utility serves the customer.

Between 1998 and 2005, the SBC raised $150 million dollars per year. The current SBC has and will raise $175 million dollars annually from 2006 through 2011.

PSC orders direct that revenue collected by utilities through the SBC be transferred to the New York State Energy Research & Development Authority ("NYSERDA") on a quarterly basis. See, Order Continuing the System Benefits Charge (SBC) and the SBC-Funded Benefit Programs, In the Matter of the System Benefits Charge III, Case 05-M-00090 (Issued and Effective December 21, 2005) at p. 28, 30.

From the SBC's inception through mid-2006, $1.87 billion dollars was funneled by the utilities to NYSERDA as required by the PSC orders. Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group for the Year Ending December 31, 2007 (March 2008), at p. ES-1.

Where Does the SBC Money Go?

NYSERDA reports that 38% of the money is devoted to providing financial incentives to Commercial/Industrial utility consumers; 23% is used for Research & Development; 19% goes to financial incentives for Residential applications, and 19% to Low Income programs. Id., at p. ES-2.

Among the dollars earmarked for "residential" programs, are financial incentive bonanzas, handed out to private owners of multi-family, residential rental properties who seek to submeter electricity to tenants in their buildings. These private owners, including some of the state's largest real estate moguls, are relieved from paying for electricity previously included in rent, by shifting the electricity costs directly to their tenants.

The Push to Submeter Multi-Family Buildings to Help Landlords Resell Electricity to Tenants

Under the Public Service Commission's lead, and the terms and conditions of a Memorandum of Understanding between the PSC and NYSERDA executed in March 1998, NYSERDA's submetering initiative began under a program named "Residential Comprehensive Energy Management (CEM)." New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group, Final Report Volume 2 (May 2004), at p. 7-74 et seq. The goal of CEM was to "promote the acquisition and installation of sophisticated energy management and advanced metering systems in residential applications"; to submeter 15,000 multifamily dwellings; and to assist building owners to take advantage of "retail competition," i.e., ESCO service. Id.

Elusive Energy Savings?

The energy savings from submetering under the CEM program are unclear. The cumulative savings of electricity from the program's inception through the end of 2003 was estimated to be 2.1 GWh. Id. at p. 7.77. Estimates for the ensuing years brought even more meager savings raised the cumulative total to 3.0 GWh by the end of 2004; Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group, May 2005, at p. 6-5, available at and to 3.5 GWh at the end of 2005. Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group, May 2006, at p. 5-6.

NYSERDA has since stopped reporting estimated CEM program electricity savings. In the subsequent annual report, energy savings from two other programs The Low-income Assisted Home Performance Program and the Assisted Multi-Family Program.were added to the CEM estimates, which allowed NYSERDA to report a more than ten-fold increase in savings – 38.2 GWh – as of the end of 2006. Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group, March 2007, at p. 4-5. (That cumulative figure somehow declined to 37.4 as of the end of 2007.) Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group for the Year Ending December 31, 2007 (March 2008), at p. 4.5.

Ultimately, the CEM program was phased out, and replaced with a new, PSC-sanctioned program called the "Multifamily Building Performance Program for Existing Buildings." NYSERDA's most recent annual report showed that the new Multifamily Building program has reached only 3% of its electricity savings goal. Final Report, New York Energy $mart Program Evaluation and Status Report to the System Benefits Charge Advisory Group for the Year Ending December 31, 2007 (March 2008), at p. ES-13, available at: A more stunning admission, particularly in view of the PSC's headlong rush to submeter multifamily dwellings, see PULP Network article on the upcoming PSC Technical Conference on Submetering, is that NYSERDA has achieved 0% of its goal to save market rate tenants in submetered buildings $250 per year and it has achieved only 6% of its goal to save low-income tenants $195 per year. Id. at p. ES-14

Added Costs and Little Benefits to Tenants

The PSC-sponsored, ratepayer funded, NYSERDA-administered submetering initiative amounts to a sugar plum for real estate developers, building owners, property managers, submetering companies, electrical apparatus sellers, consulting engineers and energy management service companies. Tenants do not fare nearly as well.

Typically, a New York City landlord who submeters to tenants in rent stabilized apartments provides a small rent reduction in accordance with DHCR schedules, and bills the tenants separately for electricity, charging in excess of the rent reduction. For example, a New York City tenant in a rent stabilized three-room apartment would see a rent reduction of $38.99 when the landlord begins to submeter. But the electricity charges of the landlords are typically much higher. There is no requirement for landlords of unregulated premises to reduce rents when the burden of paying electric bills is shifted to tenants under a PSC order.

Owners may have had little incentive to install efficient appliances even when they paid the electric bills. They could recover the cost of appliance upgrades over time by seeking larger rent increases for rent stabilized apartments, but they may have preferred to make other capital investments with greater returns, for example, by buying another building.

The PSC and NYSERDA apparently imagine that submetered tenants will conserve electricity by responding to higher prices, and will make long term conservation investments by purchasing new appliances or reducing their usage. See NYSERDA Residential Electric Submetering Manual, Oct. 2001, p. 7.

As newly submetered tenants attempt to cool poorly insulated apartments with turn-of-the-last century windows and decades-old appliances, in an environment of rising electric rates, their energy costs escalate well beyond the offsetting rent reduction. In many cases owner-supplied appliances such as obsolete through-the-wall air conditioners or refrigerators cannot be replaced without landlord permission and without paying additional rent increases for the landlord's investment. Many tenants could not afford to replace these appliances even if the landlord allowed them to do it. And, tenants have no control over their buildings' structural energy efficiency, e.g., insulation, windows or over common areas.

Typically, PSC orders permitting landlords to sell electricity require them to charge actual costs and that in no instance can their charges exceed the charges that would be paid if the customer obtained service as direct customer of the utility. The PSC submetering orders also require notification to tenants of Home Energy Fair Practices Act ("HEFPA") rights and remedies, including the right to have the PSC decide a bill dispute.

Legislation enacted in 2002 clarified that building owners who submeter are indeed "utilities" under Article 2 of the Public Service Law. Despite the law, the PSC regulations and the PSC orders, however, some landlords appear to be routinely denying submetered tenants the safeguards of HEFPA. For example, some submetering building owners overcharge tenants and fail to give tenants timely and adequate notice of the basic HEFPA protections. The PSC ignores these violations and has consistently refused to act in a timely fashion upon complaints brought to its attention months ago. See Lax PSC Enforcement of Submetering Orders Allows Landlords to Overcharge for Electricity Sold to Tenants and to Circumvent HEFPA Protections.

Millions of dollars of money raised from customer surcharges are being doled out by NYSERDA to pay landlords for the substantial cost of converting from master metered service with electricity included in rent to submetered service separately billed to the tenants. Even though they have accepted NYSERDA financial incentives, sometimes up to 100% of their cost to submeter, landlords are overcharging tenants and violating HEFPA.

Allowing landlords to sell electricity to residential tenants with no meaningful price regulation and without consumer protection is another piece of the PSC's deregulation agenda. The Commission's tolerance for submeterers' disregard of their obligations sends the message to other submeterers that once the PSC has given its approval to submeter and the NYSERDA money has been doled out, the PSC will ignore submeterers' obligations to customers.

The Public Service Law does not specifically address submetering. Indeed, many years ago, the PSC banned it altogether, calling it "parasitic," but the practice has gradually re-emerged. Submetering is achieved through PSC regulations and orders, which are far too discretionary, provide no enforcement mechanism, and, as experience has shown, are prone to abuse.

In addition, tenants are getting a raw deal in the PSC/NYSERDA programs. At a minimum, when a building is submetered with NYSERDA grants there should be a comprehensive assessment of the impact on tenants. Many tenants in low and moderate income buildings live on fixed incomes and are unable to absorb the higher costs, or to invest in energy saving measures to cope with the new electricity charges. In addition to (or instead of) giveaways for landlords that pay for the installation of the new meters, NYSERDA should protect tenants, by replacement of inefficient appliances and requiring the landlord to improve thermal efficiency of the building envelope. Given the direction of the PSC and NYSERDA, and their tilt toward landlords, legislation is needed to adequately address the growing problems in this field.

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Postby TenantNet » Sun Mar 14, 2010 1:00 am

PSC Greenlights Eviction of Tenants for Nonpayment of Electric Bills
from http://pulpnetwork.blogspot.com/2010/03/psc-greenlights-eviction-of-tenants-for.html
Friday, March 12, 2010

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.

Posted by Gerry Norlander at 12:39 PM
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Joined: Mon Jan 21, 2002 2:01 am
Location: New York City

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