PSC-06-12-00007-P Residential Electric Submetering Regulations

2/8/12 N.Y. St. Reg. PSC-06-12-00007-P

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 6

February 08, 2012

RULE MAKING ACTIVITIES

PUBLIC SERVICE COMMISSION

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. PSC-06-12-00007-P

Residential Electric Submetering Regulations

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Amendment of Part 96 of Title 16 NYCRR.

Statutory authority:

Public Service Law, sections 4(1), 30-53, 65 and 66

Subject:

Residential electric submetering regulations.

Purpose:

Reviewing and amending electric submetering regulations for multi-unit residential premises.

Substance of proposed rule (Full text is posted at the following State website:www.dps.ny.gov ):

The Commission is proposing to revise the rules relating to electric submetering in multi-unit residential dwellings, 16 NYCRR Part 96, which were originally adopted in 1988 with minor amendments in 1996. The purpose of the revision is to include in Commission regulations the statutory change, in 2003, of the application of the Home Energy Fair Practices Act (HEFPA) (Public Service Law §§ 30-52) to submeterers through Public Service Law § 53. In addition, the Commission has issued numerous orders clarifying and modifying the obligations of submeterers in an effort to balance the need for energy efficiency and consumer protections. It is necessary to update the electric submetering regulations to reflect the changes made by Commission orders and the extension of HEFPA to submetered tenants, as well as streamlining the Department of Public Service's review of routine submetering petitions. A summary of the more significant changes in the draft revisions to the submetering regulations can be found in the Regulatory Impact Statement.

Text of proposed rule and any required statements and analyses may be obtained by filing a Document Request Form (F-96) located on our website http://www.dps.state.ny.us/f96dir.htm. For questions, contact:

Leann Ayer, Public Service Commission, 3 Empire State Plaza, Albany, New York 12223-1350, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Jaclyn A. Brilling, Secretary, Public Service Commission, 3 Empire State Plaza, Albany, New York 12223-1350, [phone], email: [e-mail]

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

Statutory Authority:

Authority for the proposed revisions to 16 NYCRR Part 96 is contained in Public Service Law (PSL) § 66(12), which gives the Public Service Commission (Commission, PSC) broad authority over electric utility tariffs; PSL § 65, which requires the Commission to ensure that electric service is safe and adequate and that electric rates are just and reasonable; and PSL § 4(1), which assigns the PSC "all powers necessary or proper" to carry out these mandates. Through utility tariffs, the Commission has governed the manner in which electricity is provided to master-metered buildings that submeter. Specifically, in 1951, the Commission prohibited submetering, a decision upheld upon judicial review (Matter of Campo Corp. v. Feinberg, 279 A.D. 302 (1952) aff'd 303 N.Y. 995). The court relied on the Commission's authority to regulate "reasonable classifications, regulations and practices under which a utility. . . renders service." In 1976, in Case 26998, the Commission required individual metering in new construction to encourage energy conservation; in 1988, the Commission adopted submetering regulations. Pursuant to those regulations, the Public Service Commission has approved petitions to submeter on a case-by-case basis. Through these unchallenged orders, the Commission has, among other things, adopted generic submetering standards with particular attention to premises with electric heat and in which tenants who receive housing assistance reside.

In 2003, the Public Service Law was amended to extend application of the Home Energy Fair Practices Act (HEFPA, PSL Article 2) to "any entity that, . . . sells or facilitates the sale. . . of. . . electricity to residential customers." In a 2006 New York Supreme Court decision, PSL § 53 was held to apply to submeterers, thus requiring them to provide tenants all HEFPA protections (Matter of Waterside Plaza, LLC, v. Pub. Serv. Commn. of State of N.Y., Slip Opinion (July 3, 2006, Ferradino, J.).

Legislative Objectives:

None.

Current Requirements:

The current residential electric submetering regulations were adopted in 1988 with minor amendments in 1996. In 2003, the legislature extended the application of HEFPA (PSL §§ 30-53) to submeterers. Commission determinations approving individual submetering petitions, some with generic application to all submeterers, as well as judicial decisions, have further defined the obligations of submeterers.

Needs and Benefits:

It is necessary to update the electric submetering regulations to reflect Commission orders, the extension of HEFPA to submeterers, and to streamline the Department's review of routine submetering petitions. The proposed regulations are consistent with these prior determinations and, for the most part, simply implement their requirements.

Between 2005 and 2011 the Department convened meetings with stakeholders to discuss modifications to the submetering regulations and also invited written comments.

Support for Direct Metering in New Construction

The most significant stakeholder concern is the proposal to require direct metering in new or renovated buildings. Department Staff proposed the requirement to direct meter because of difficulties enforcing submeterer compliance with HEFPA and submetering requirements in general. A utility customer enjoys experienced utility consumer complaint handling which a submetered customer does not. Based on Staff's experience, submeterers are often unresponsive to DPS consumer complaint personnel. Moreover, while the Public Service Law provides undisputable Commission authority to regulate direct metered services, PSC authority over submetering has been shaped by case law, tariff enforcement, Commission orders, and 30 years of past practice. By some accounts, the cost to install direct meters may be more than the cost to install submeters. This cost differential, while asserted, has not been fully explained nor supported; neither have any cost offsets, such as the utility's provision of direct meters at no cost to developers. The Commission is assessing whether such cost differential outweighs the customer protections and regulatory efficiency provided by direct metering.

Stakeholders indicated that requiring direct metering in all new construction would, among other things, prohibit the integration of the most advanced technology and environmentally-friendly construction designs. Given the City of New York's policy to encourage on-site cogeneration and achieve demand reduction during peak load periods, DPS developed a compromise result in which submetering in new and renovated buildings may be authorized if a petition demonstrates that the building will employ advanced energy efficiency technology, such as on-site co-generation equipment and/or participate in demand response programs or alternative energy efficiency initiatives. While submeterers may prefer a complete removal of the direct metering requirement in new and renovated buildings, many master-metered buildings exist that still may be converted to submetering. Therefore, the strongest impact on the submetering industry will only occur as every building in New York City is replaced or completely overhauled without these reliability and energy efficiency measures in place. Moreover, the requirement of direct metering may incentivize developers and landlords to build the most advanced energy efficient buildings possible to obtain authorization to submeter. Finally, allowing submetering only in buildings with advanced energy efficiency measures balances the need for in-City reliability with the statutory protections afforded direct metered customers.

Condominium and Cooperative Submetering

The proposed regulations require that submetering in condominiums/ cooperatives (condo/coop) receive Commission approval. Since 1988, DPS has relied upon the legal agreements between condo/coop owners and management in any transition to submetering in existing buildings, while submetering of newly built condo/coops has required Commission approval. The need to require condo/coops to follow the abbreviated Notice of Conversion procedure in the proposed regulations is to protect submetered residents. Because submetered condo/coop residents now enjoy the same HEFPA protections as submetered rental tenants, DPS can enforce the rights of condo/coop residents, and ensure notification of those rights, only if the Commission is aware that a condo/coop has converted to submetering. Requiring the simpler Notice of Conversion procedure is the least burdensome way to accomplish this goal.

Termination of Electric Service

The proposed regulations require that submetering equipment be capable of terminating electric service to individual units. HEFPA provides service termination as the ultimate remedy available to service providers for unpaid bills. Moreover, submeters that allow individual service shut-off are available and are being used by submeterers. The alternative to individual service termination is tenant evictions for non-payment of electric charges, which consumer advocates have long opposed. Further, not requiring service shut-off capability could be misinterpreted as a PSC endorsement of eviction as an acceptable remedy for non-payment of electric charges. For these reasons, the proposed regulations require submeterers to install equipment that is capable of service termination to individual units.

COSTS

Costs to Private Regulated Parties:

Submeterers may be concerned that the proposed regulations will increase their costs; however, building owners retain the margin between what the landlord charges tenants for submetered electric service and what the landlord pays the utility. Moreover, other benefits may exist for submetered buildings such as landlords (1) participating in demand-response programs, by which submeterers may curtail usage in common areas during peak periods and obtain a monetary benefit for such curtailment; (2) avoiding costly investment in capacity expanding equipment to accommodate increasing electrical usage; (3) avoiding the burden of absorbing increasing electric costs in rent; and/or (4) enlisting in programs that provide financial support to offset the cost of submeter installation and energy efficiency measures. Balanced against these landlord concerns is the benefit submetering provides, not only in encouraging energy conservation but in rewarding energy conserving tenants who, without submetering, pay averaged electric costs rather than costs that reflect their reduced usage.

Special Considerations for Electric Heat

In some instances, such as when electric heat will be submetered, additional consumer protections are necessary to protect submetered tenants. That is, because electric heat is so expensive, the proposed regulations require that an owner of an electrically heated building must provide in its petition either a forecast based on one year of apartment-level shadow billing or a study of actual submetered data from comparably situated buildings to demonstrate that, when submetering is introduced, more than 60% of residents are expected to pay. . . less for the submetered electricity during the first 12 months of electric service, than the amount of rent reduction they will receive." Whether a petitioner elects to shadow bill or provide a study of actual submetered data, petitioners will incur additional costs. Costs are minimized by providing a study but are nonetheless necessary to protect tenants.

Other parties commented that submetering of electric heat should be banned altogether. An outright ban on submetering in buildings that use electric heat, however, could remove significant opportunity for energy efficiency. The safeguards in the draft regulations balance the need to protect tenants in electric heated buildings while not losing altogether the energy efficiency opportunity that price signals provide to encourage conservation.

Submeters Must Comply with 16 NYCRR Parts 92 and 93

The proposed regulations require that submeters meet the regulatory standards defined in 16 NYCRR Parts 92 and 93, which is required of utility meters. Submeterers must also conduct routine meter testing, also required of electric utilities. Some stakeholders indicated that these requirements would be expensive to implement and that routine testing would be difficult where meters are located within individual dwelling units. The regulations provide submetered tenants the same accuracy protections as electric utility customers, particularly since any HEFPA billing complaints will have to be verified with reliable data. Any added costs are recoverable from the rate margin between the bulk rate the utility will charge the submeterer and the residential rate that the submeterer may charge the tenant.

Refrigerator Replacements

The proposed regulations require that any proposal to submeter submitted to the Commission provide documentation sufficient to establish that refrigerators in all rental dwelling units are no more than ten years old or meet the most recently adopted federal energy efficiency standards for such appliances. Refrigerators are one of the highest energy users in most homes. Most appliances can be used less to save energy, but not refrigerators. In rental units, the refrigerator is owned by the landlord; therefore, tenants likely will not replace a refrigerator but must nonetheless bear the cost of its operation. Replacing refrigerators that are more than ten years old will result in additional expenses to landlords. This cost may be offset, however, if landlords purchase refrigerators in bulk and seek available rebates for refrigerator replacements.

Costs to Local Government:

None.

Costs to the Public Service Commission or the Department of Public Service:

None.

Costs to Other State Agencies:

None.

Local Government Mandates:

The proposed revisions impose no new programs, services, duties or responsibilities upon any county, city, town village, school district, fire district or other special district.

Paperwork:

The proposed revisions streamline filing and processing requirements except in rare circumstances. The proposed revisions eliminate the need for assisted and senior living facilities to petition for a waiver of individual metering requirements.

Duplication:

No relevant State regulations duplicate, overlap or conflict with the proposed revisions.

Alternatives:

No suitable alternative has been identified.

Federal Standards:

The proposed revisions are not impacted by any standards of the Federal government.

Compliance Schedule:

The proposed revisions will be effective upon publication of a Notice of Adoption in the New York State Register.

Regulatory Flexibility Analysis

Effect of Rule:

There will be no impact on local governments.

The proposed revisions to the electric submetering regulations, 16NYCRR Part 96, will impact multi-unit residential property owners who elect to convert electric service to individual owners and tenants at the premises from either direct utility meters or master-metered systems into submetered service. It will also affect construction of new or substantially renovated multi-family buildings.

Compliance Requirements:

The proposed revisions to the existing electric submetering regulations will continue to apply to all property owners who provide submetered electric service at multi-unit residential buildings. Assisted living and senior living facilities will no longer be required to obtain a waiver to be able to provide master-metered electric service. The proposed revisions will streamline the Department of Public Service's review of requests to submeter; clarify the obligations of submeterers to act consistently with their submetering plans and Commission orders approving those plans; specify consumer protections and notification requirements as well as energy efficiency goals; and require the use of utility-grade meters.

Professional Services:

There will be no additional professional services required as a result of the proposed revisions.

Compliance Costs:

Some submeterers have claimed that the requirement to install utility-grade meters and annual testing of submetering equipment will add costs to their operations. However, many current submeterers already use utility-grade meters. Moreover, the use of utility-grade meters and the cost to randomly test submeters annually protect end-users. Finally, because the regulations allow submeterers to charge end-users up to the higher residential rate when submeterers pay a lower master-metered rate, some of the costs may be recouped.

Economic and Technological Feasibility:

The economic feasibility is achieved through the allowed rate cap differential, described above as well as possible participation in demand-response programsthat offer financial incentives. The required use of accurate submeter technology is necessary to provide end-users with accurate electric usage measurements.

Minimizing Adverse Impact:

A review has been conducted to consider other approaches to mitigate adverse economic impact as suggested in the State Administrative Procedure Act Section 202-b(1). For instance, the Department of Public Service has added the simplified Notice of Conversion to Submeter, which we expect will expedite review and approval of the majority of requests to submeter. In response to informal comments, the Department also required that customers only receive more than one free annual meter test if it is made as part of an actual consumer complaint to avoid repeated requests by a customer to test the submeter.

Small Business and Local Government Participation:

Proposed revisions have been discussed with submeterers and their representatives on various occasions. For example, the Department of Public Service sponsored a technical conference on January 20, 2009 and accepted informal written comments.

(IF APPLICABLE) For Rules That Either Establish or Modify a Violation or Penalties:

The proposed revisions would not impose an automatic penalty. However, in addition to the Commission's current statutory authority to address submetering violations, the regulations specify that rescission or suspension of a submeterer's authorization to submeter may be imposed upon submeterers who are not in compliance with either their submetering plan, the regulations, the Commission order approving the submetering plan or other Commission orders. Moreover, if Department Staff identifies a submeterer's failure to abide by the regulations or order approving submetering (which may be cured by the submeterer within 30 days), Staff may adjust the submeterer's rate cap downward, to 60% of the residential rate, a finding that is appealable to the Commission. Any submeterer failure to abide by the submetering plan, regulations, or Commission order that results in rescission, suspension or other Commission action in response may also be cured within a 30-day period before the Commission may act.

Rural Area Flexibility Analysis

A rural flexibility analysis is not required because this rulemaking will not impose any adverse economic impacts on rural areas or on any reporting, recording keeping or other compliance requirements on public or private entities in rural areas. This proposal amends the Commission's residential electric submetering regulations in multi-unit dwellings, which are located primarily in urban, not rural, areas.

Job Impact Statement

A job impact statement is not submitted because this proposed rule will have no adverse impact on jobs or employment opportunities. The proposal amends the Commission's residential submetering regulations.