Amd SS43 & 75, ren S53 to be S54, add S53, Pub Serv L; amd S79, Mult Dwell L; amd S173, Mult Res L
Requires notification to utility customers of their right to direct access to public service commission complaint procedures without arbitration or court proceedings; restricts the conversion of residential rental buildings from being mass-metered to submetered; prohibits the collection of charges for residential utility service deemed to be rent; and requires the public service commission to audit previously approved utility submetering orders, compare usage before submetering to usage after submetering orders were implemented, and prepare a report concerning its findings.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A1119
SPONSOR: Kellner TITLE OF BILL: An act to amend the public service law, in relation to
requiring notification to utility customers of their right to direct
access to public service commission complaint procedures without arbi-
tration or court proceedings, to restricting the conversion of residen-
tial rental buildings from being mass-metered to submetered and to
prohibiting the collection of charges for residential utility service
deemed to be rent; to amend the multiple dwelling law and the multiple
residence law, in relation to prohibiting the collection of charges for
heat-related residential utility service; and to require the public
service commission to audit previously approved utility submetering
orders, compare usage before submetering to usage after submetering
orders were implemented, and prepare a report concerning its findings
PURPOSE OR GENERAL IDEA OF BILL: 1) To ensure that residential utility
customers, including submetered customers, are provided annual notice of
their right to access the Public Service Commission's complaint process;
2) To ban the deeming of charges for electric service provided by the
landlord to residential tenants to be "rent"; 3) To require the Public
Service Commission to perform an audit regarding submetering orders it
has issued in the last five years to determine compliance by building
owners with utility price caps and tenant protection provisions, and to
determine if submetering has resulted in energy savings in those build-
ings; 4) To amend section 79 of the Multiple Dwelling Law to eliminate
the practice of building owners charging residential rental tenants for
electricity, natural gas, and other fuel used for space heating in the
dwelling unit; 5) To provide for a transparent procedure by which a
private or government entity applying to submeter a residential rental
building shall make certain facts of the building known that pertain to
its energy efficiency, require minimum improvements to the building for
energy efficiency, and provide for tenant input as the application is
considered by the Public Service Commission.
SUMMARY OF SPECIFIC PROVISIONS:
§ 2: Amends subdivision 1 of section 43 of the public service law, as
added by chapter 713 of the laws of 1981 to require the Public Service
Commission to maintain regulations requiring municipalities and utili-
ties annually notify all residential utility customers, including subme-
tered customers, that the complaint handling procedures of the Commis-
sion can be invoked for an administrative determination of their
complaint by telephone call, letter, online complaint form, or a visit
to the office of the Commission;
§ 3: Amends the public service law to:
-Provide that a master-metered residential rental building may be
converted to submetering if a private or government entity providing
electric services files an application with the Public Service Commis-
sion and meets the conditions of this act;
-Require the applicant to include in the application a procedure for
written notification to tenants of the proposal to submeter within 30
days of the application, which notification shall include: a summary of
the information provided to the commission, notice the tenants that a
public comment period has commenced, and an indication of the length of
that comment period; the address and telephone number of the nearest
Commission office; the date, time, and location of a public hearing set
by the Commission to hear testimony from the public; where on the
Commission website the entire application can be viewed and how a free
copy can be requested by mail as well as providing a toll free number
for making such requests; a statement stating any economic advantages of
submetering at the premises; a description of the submetering service
that will be installed; the method of calculating utility rates for
tenants, including information about the utility's tariffed residential
rate for directly metered service; a description of compliant procedures
and tenant protections consistent with the Home Energy Fair Practice
Act; and a demonstration that arrangements have been made with the local
social services department to continue to provide electric service upon
acceptance of utility assistance grants;
-Require the Commission hold a public hearing near the residential
building at least 30 days prior to the conditional and final approval or
denial of the submetering application;
-Require the applicant to provide to include in its application to the
Commission: findings of a study commissioned by the applicant of the
thermal characteristics of the building; records of the last twenty-four
months of electrical usage and charges; the projected submetered rates
given the current usage rate for the various dwelling types that exist
in the building; and a plan to replace all non-energy star rated appli-
ances provided by the applicant to energy-star rated appliances;
-Require that the applicant shall pay all the costs of an independent
energy consultant chosen by the tenants if a group of at least 50% of
the tenants request such analysis and at least 3 bids are received by
the applicant;
§ 4: Amends section 75 of the public service law to allow that in any
action or proceeding in any court for the collection of gas or electric
charges or for the possession of real property by reason of an unpaid
charge, if the charges for the utility are deemed to be rent under any
arrangement or agreement related to the rental property this shall be a
complete defense to the action;
§ 5 - § 6: Amends Subdivision 1 of section 79 of the multiple dwelling
law to prohibit an owner or agent of any owner from separately charging
tenants or occupants for any electricity, electric service, natural gas
or natural gas service or other fuel utilized to heat living quarters.
Section 173 of the multiple residence law is amended to do the same.
§ 7 - § 8: Amends the public service law as follows:
-Requires the Public Service Commission to audit all utility submetering
orders from January 1, 2004 through the effective date of the act and
determine whether utility price caps and tenant protection provisions
have been complied with as well as comparing the rate and cost of utili-
ty usage prior to the submetering order and after the submetering order;
-The audit must be completed within twelve months;
-Requires the Public Service Commission to make a report to the governor
and the legislature of its findings, conclusions, and recommendations no
later than ninety days after completing the audit;
-Prohibits new submetering orders from being approved until the report
is received by the governor and the legislature;
§ 9: Act to take effect immediately.
JUSTIFICATION: In 1951, the Public Service Commission (PSC) prohibited
all residential electric submetering, calling the practice "parasitic."
That decision was upheld in courts {Campo Corp. v. Feinberg, 279 App.
Div. 302 (3d Dept. 1952) affirmed 303 N.Y. 995 (1952)} As a consequence,
utilities were directed by the PSC to adopt electric tariffs broadly
prohibiting the resale of utility service. The previously permitted
landlord submetering was converted to direct utility metering.
Subsequently, the practice of submetering was again allowed by the PSC
on a case by case basis, mainly for residential cooperative and condo-
minium projects, where tenants have an ownership and governance inter-
est. Public service commission regulations and numerous orders have
allowed landlords waivers from the general prohibition against resale of
utility service contained in commission regulations and utility tariffs.
As a result, landlords are being allowed to be monopoly providers of
electric service to their captive tenants. Also, in many instances the
state division of housing and community renewal has allowed landlords
who previously included utility service in the rent to change the terms
of leases so as to shift responsibility for payment of electric charges
from landlords to tenants.
The PSC has long had primary jurisdiction over customer disputes regard-
ing utility service, which are decided administratively, subject to
judicial review of final decisions under CPLR Article 78. For residen-
tial customers the requirements for prompt and simple utility and admin-
istrative agency complaint determination procedures are now contained in
the Home Energy Fair Practices Act (HEFPA), Public Service Law (PSL) 30,
et seq. PSL Section 43.1 requires all utilities, upon receiving a
customer complaint, to have procedures for a "prompt investigation of
any complaint," and for "prompt reporting to the complainant of the
result of such investigation." After any report of the utility adverse
to the customer, the utility is required to "inform any complainant...
of the availability of the commission's complaint handling procedures."
This bill is necessary to correct current complaint handling practices
of some providers of utility service and the PSC which have had the
effect of diverting complaints regarding electric service to outside
third parties for arbitration or adjudication or deterring customers
from lodging complaints. This impedes the provision of service in
accordance with the requirements for prompt and simple utility and
administrative agency complaint determination procedures contained in
HEFPA, and thwarts the prompt and efficient resolution of electricity
customer complaints.
Despite a longstanding regulation requiring landlords providing subme-
tered electric service to implement complaint procedures "consistent
with HEFPA," (16 NYCRR Part 96.2), some PSC orders prior to 2002 approv-
ing landlords' petitions for submetering approval mention complaint
procedures which involve third party determinations, such as arbitration
or court proceedings, despite the applicability of the PSC complaint
handling procedures. These alternative venues for complaint adjudication
all involve time consuming and comparatively formal proceedings. They
may also prove to be expensive and risky, for example, if an eviction
case is the forum for resolution. These factors may serve to deter
customers with meritorious complaints from making them, and reduce
awareness at the PSC of the nature and quality of customer service actu-
ally provided by certain utilities.
Such alternative complaint procedures are inconsistent with the Commis-
sion's primary jurisdiction over electric service and with the express
HEFPA requirements in PSL § 43 of a "prompt investigation" and "prompt
reporting of the result of such investigation," with information
provided to the customer "of the availability of the commission's
complaint handling procedures."
In 2002, the legislature adopted the Energy Consumer Protection Act, and
a new PSL § 53 clearly eliminated any power of the PSC to allow anything
less than "full compliance" with HEFPA or to waive any provision of
HEFPA for submeterers. Subsequently, however, the PSC issued many subme-
tering orders which contain confusing references to third party arbi-
tration or court procedures for resolution of complaints regarding util-
ity service. There is no basis in existing law for referral of the
customer's dispute to court or arbitration. Such procedures for referral
of complaints to third parties deviate from the statutory procedures
established in PSL § 43. As a result of the practices of the PSC and
submeterers, many submetered residential customers are confused or
misinformed regarding the statutory complaint procedures which actually
apply to disputes regarding their electric service.
-Additionally, to safeguard the rights of tenants, it is important to
ensure that the submetering application process is transparent and
affords affected residents the opportunity to comment on the application
as well as ensuring that the thermal characteristics of the building are
known, deficiencies in energy efficiency are reasonably mitigated, and
that there are checks in place to safeguard against tenants being unduly
burdened from unjust and unreasonable submetered charges.
- In its regulations and in its orders granting applications of owners
of residential real property to waive longstanding tariff and regulatory
prohibitions of submetering, the public service commission acknowledges
the applicability of HEFPA to the landlords in their new capacity as a
provider of utility service. The commission also allows or approves
standard lease provisions which "deem" charges for utility service to be
"additional rent" due the landlord under the lease. These "additional
rent" provisions give landlords a claim to evict tenants for unpaid
"rent" which really includes charges for utility service.
The legislature has carefully designed programs designed to protect
utility customers from abuse, such as HEFPA, and has created safety nets
for the needy in the emergency utility assistance program under social
services law § 131-5 and the energy crisis provisions of the home energy
assistance program under social services law § 97 (HEAP). Assistance in
these programs is triggered by a notice of termination of utility
service, and is not available when a landlord attempts to evict tenants
for unpaid rent. As a result, submetered tenants who have temporary
difficulty in meeting their obligations to pay for utility service are
in a far worse position than direct utility customers, who cannot be
evicted from their homes by the provider of utility service over unpaid
or disputed charges, who have the opportunity to pay arrears over time
in affordable installments through deferred payment plans which must be
offered as an alternative to termination of utility service, and who
have the opportunity to obtain emergency HEAP or 131-s assistance if
alternative payment arrangements with the utility cannot be afforded.
A "Residential Electrical Submetering Manual" published in 2001 by the
New York State Energy Research and Development Authority (NYSERDA)
suggests to landlords who provide submetered electric service to their
tenants that they may evict tenants in court proceedings as an alterna-
tive to complying HEFPA. Thus, rather than provide tenants in financial
difficulty ample notice and the opportunity to pay arrears over time
through deferred payment agreements required to be offered under HEFPA,
and rather than provide detailed HEFPA notices to the elderly and disa-
bled which require referral to public assistance if they cannot make
arrangements, landlords are being encouraged to evade HEFPA requirements
and to bring tenants with unpaid electric charges to court seeking court
judgments and eviction orders.
The deeming of utility service to be "additional rent" subjecting a
utility customer to eviction at the hands of an owner who provides
monopoly utility service under PSC orders is resulting in displacement,
hardship and injustice to submetered tenants, who are often unrepre-
sented in court proceedings, and is adding to the burden of the courts.
Some courts have prohibited submetering landlords from terminating
tenancies for unpaid electric charges (see Related Tiffany, L.P. v.
McConeyhead, N.Y. City Civil Court L&T No. 55444/04, June 30, 2004) on
the ground that the "deeming" language of the landlord's lease does not
work to convert utility charges due into rent. In contrast, some court
decisions have allowed judgments and evictions for unpaid charges for
utility service provided by the landlord that were contractually defined
as "rent." This bill would clarify that unpaid charges for residential
utility service cannot be the basis for an eviction proceeding.
This bill will bring to a halt the growing use of the landlord tenant
courts by landlords to collect charges for unpaid electric service as
"additional rent." It will not affect any right the landlord may have to
collect its charges through conventional means, such as an action for
damages, and it will not affect any right the landlord may have, after
complying with HEFPA, to cease providing utility service if the tenant
does not pay. The bill will halt the evasion of HEFPA compliance, will
enable needy tenants to obtain energy assistance triggered by advance
termination notices, and will channel disputes over utility charges away
from the courts and back to the PSC's complaint handling and decision
process under HEFPA, i.e., § 43.2.
- As utility costs rise, some building owners have begun to shift their
costs for fuel and electricity onto their tenants, by requiring tenants
to pay heating surcharges, separate and apart from rent, for fuel or
electricity used to heat their dwelling units. These surcharges are
based on consumption measured by either landlord-owned meters, or based
on apartment square footage allocations. These surcharges, typically for
natural gas or electricity, are inherently unpredictable, are not quan-
tified in tenant leases, and are not knowable in advance. As such, they
cause great hardship to tenants living on fixed incomes from social
security, disability and pensions, who lack significant savings.
Frequently, heating surcharges imposed by owners are not subject to
outside audit or verification by the tenant and are therefore inherently
prone to abuse.
Shifting heating costs to tenants reduces economic incentives for land-
lords to improve the thermal efficiency of their structures, through
measures such as insulation, window replacement with high efficiency
glass, and provide more efficient heating systems, fixtures, and smart
controls. This is contrary to state policy to promote energy efficiency
and to reduce greenhouse gas emissions.
Additionally, shifting building owners' heating costs to tenants through
unpredictable and continually varying surcharges renders these costs not
transparent to tenants, because owners are not obligated to reveal the
energy inefficiencies of their buildings or the amount of energy wasted
by the heating equipment they operate. In contrast, if building owners
retain direct responsibility for heating costs, they will,recover those
costs in the rent they charge and they will have the incentive to adopt
cost effective efficiency measures. The charge for rent is fixed and
transparent, and can be understood by existing and prospective tenants.
The Multiple Dwelling Law already imposes upon landlords the obligation
to provide heat or heating fixtures to tenants.
This bill prevents owners of multiple dwellings from imposing charges
for natural gas, electricity, or other fuel used for space heating sepa-
rate from the stated rent. It does not affect situations where a tenant
has directly metered gas or electric service from a franchised gas
corporation or electric corporation.
-Recently, submetering has been recast as an environmental cause,
encouraging consumers to conserve energy by making them directly respon-
sible for the costs associated with their dwelling unit's energy usage.
But as utility costs rise some building owners have begun to see this as
a way to pass high costs on to their tenants, and as building owners are
not obligated to reveal energy inefficiencies in their buildings as part
of their applications (nor are they required to make efficiency improve-
ments), these costs can be very high.
This bill will allow the legislature to review the current practices of
submetering and ensure that the goals of energy conservation are more
than theoretical, that tenants are being protected as per the submeter-
ing orders, and that all applicable utility price caps are adhered to.
If not, the findings and recommendations of the commission's audit
should be helpful in making a public policy determination of what should
happen next on this subject.
PRIOR LEGISLATIVE HISTORY: A.9389, A.743 of 2011-12; A.9389 of 2010
FISCAL IMPLICATIONS: To be determined.
EFFECTIVE DATE: This act shall take effect immediately.
