Tenants Can Check if Owners Charge More than the Price Cap on Submetered Electric Service

Electricity prices in New York spiked this winter.  See Mid-winter power price spike for NYsers on Con Ed bills.  This could become a significant problem for submetered tenants, whose landlords are allowed by PSC orders to resell electricity to the tenants.   Landlords of master metered multi family housing  take service at bulk rates that now flow through an unmediated NYISO spot market price.  In contrast, Con Edison’s SC1 residential rates are still hedged (somewhat) and so even though the residential rates spike, they may not spike nearly as high as the pure NYISO spot market price now paid by owners.

PSC submetering orders issued for specific buildings generally require landlords to pass through  (presumably lower) bulk power bills without any markup (except for a  $4 monthly billing and collection charge), and PSC submetering regulations  bar charges that are higher than an SC1 customer would pay in any month. Some landlords may attempt to flow through to their tenants bulk power prices for master metered service that spiked higher than the SC1 rate cap.

This requirement can be checked by tenants using the submetering calculator at Con Edison’s website.  Tenants can input their zip code, dates of service, and kwh consumption for the period, and the calculator indicates what Con Edison would charge its full service SC1 residential customers for that same amount of service.  Tenants may then compare that amount with their actual bills from their landlords.  It works only for submetered customers who are in Con Edison’s service territory, generally New York City and Westchester.  Most of the submetering allowed by the PSC has been in Con Edison territory.

If tenants believe they have been overcharged for electricity, they may access the owner’s complaint process and if that does not solve the problem, they may ask the PSC to adjudicate the issue, through the PSC complaint process, which can be invoked online or by phone, by mail or in person.  For purposes of the Home Energy Fair Practices Act (HEFPA), a submetering landlord is a utility, and the owner is required to comply with all HEFPA customer protection requirements.

This calculator, though labelled for submetered customers, may also be useful for Con Edison customers who receive bills for ESCO service charges.  They could compare their actual bills for service including charges for ESCO service with what the calculator indicates they would have paid for full Con Edison service had they not switched to an ESCO.

The calculator will not reveal whether the owner is marking up bills but staying under the price cap.  The PSC does not routinely audit any landlord submeterers to see if they are marking up bills in violation of a submetering order or the price cap regulation.  The PSC has not actually used its powers to sanction owners who violate submetering orders and regulations.  See PSC Warns Landlords To Follow Submetering Orders Allowing Sale Of Electric Service To Residential Tenants.    It is impossible for tenants to know if landlords are marking up the bulk power charges in months when those charges are lower than SC1 charges would be.  Con Edison will not tell tenants in submetered buildings what the owner’s bill is, invoking confidentiality.   The Utility Project filed testimony in the recently concluded rate case in support of a mechanism for tenants or their representatives to obtain access to Con Edison data to check whether landlords are marking up their electricity charges to submetered tenants, but without success, when the case was settled by other parties and the Commission approved the settlement. The mechanism could be as simple as  requiring landlords who seek submetering orders to consent to give reasonable access to tenants or their representatives to the Con Edison data regarding bulk electric bills to their building.  In buildings with well organized tenant associations, their accountants could audit for compliance with submetering conditions and for proper allocation of bills between tenant charges for tenant usage and landlord costs for common areas such as for hallway and outdoor lighting and common HVAC costs.

The PSC submetering scheme in Part 96 of its regulations involves PSC authorization for each building as it is converted to submetering, and PSC regulations allude to an “appropriate rent reduction formula that accurately reflects the applicant’s overall reduction in his total electric costs resulting from conversion to submetering.”    16 NYCRR § 96.2(b)(8).  The State Division of Homes and Community Renewal (HCR) rent reduction schedules for  the non-federal rent-regulated housing govern how much the rent will go down when the landlord no longer includes  electricity in rent for to the tenant’s unit.  The  schedules were designed to give financial incentives for owners to submeter, and to disadvantage tenants.    HCR reduced rents on the assumption that submetered customers would pay 20 – 27% less than SC1 Con Edison customers in New York City, premised upon the outdated assumption that a submetered tenant’s bills would be that much lower than if the landlord converted to direct Con Edison service.   In addition, schedules for both submetered and direct utility service rent reductions are based on the faulty assumption that tenant usage goes down 20% with a change to individual unit metering, when there is no impartial peer reviewed research to support that.

The assumption that submetered tenants would pay less than SC1 customers and the unsubstantiated assumption about usage reduction should be revisited by HCR.  In the 1990’s, a system designed to fairly adjust rents after submetering was jettisoned by the old DHCR, in favor of schedules deliberately intended to tilt in favor of landlords by skewing the rent reductions to be smaller after submetering.   Those schedules were annulled in 2000 when tenants sued.  In response, the agency commissioned a study to confirm pre-ordained modified schedules that still tilted in favor of owners, so that rents would go down less than the electricity costs shifted to tenants.  Put differently, in bureaucratese, after the first effort to limit the rent reductions and favor of landlords,

“Recognizing the need for a new rent reduction formula, DHCR consulted with NYSERDA, and joined with that agency to commission a study by a recognized architectural and engineering firm . . .  Upon completion of the study, entitled Rent Reduction Analysis, DHCR, with the advice and guidance of NYSERDA, developed the rent reduction formula….”

The consultants’ mission assigned by the state agencies was not to calculate a fair post-submetering rent reduction formula.  Rather, it was commissioned to justify certain revised schedules.  It did so by incorporating the faulty assumption that tenants would use 20% or so less energy after individual metering and the proposition, outdated now if it was accurate then, that submetering would be about 20% cheaper than direct metering from the utility.  See the New York Utility Project’s analysis of the questionable study methodology.  Despite the flaws, a court decision in 2006 upheld the revised HCR schedule based on the  “verified, statistical data and reports from an independent architectural and engineering firm”  as being within the acceptable scope of administrative agency powers and expertise, which the court declined to second-guess.  Since then HCR has updated the schedules to account for general inflationary price increases, but the dubious assumptions of cheaper electricity for submetereed tenants and less usage after submetering remain embedded in the schedules.

Clearly, the rent reduction formula is not “appropriate” as PSC regulations require if  the assumption of reduced rates for bulk power to master metered buildings, inherent in the reduced rent reductions for submetered tenants,  is not real.  A change of heart at HCR to do a new study in search of a genuinely fair rent reduction formula, or legislation requiring that, may be necessary to give justice to tenants whose rent no longer includes electricity and whose rent reductions are not reflective of the actual cost they face after a conversion to submetering or direct utility metering.  In addition, the PSC or legislature should take steps to assure that landlords are not marking up charges to profit from submetered tenants whose smaller rent reductions are premised upon the pass-through of lower bulk power rates in months when those are below the price cap.

Tenants who receive the low income Senior Citizen Rent Increase Exemption (SCRIE) and similar protection for disabled tenants (DRIE) are exempt from submetering, and their electric service will continue to be included in their rent, without change, notwithstanding a PSC submetering order authorizing conversion to submetering.  Also, design code requirements for HCR housing do not allow submetering, and mandate direct utility metering.  These protective measures  reflect the practical reality: a conversion to electricity submetering generally imposes added economic burdens upon tenants.

For more information on submetering, see Residential Submetering in New York.

Gerald Norlander

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