Submetering Electricity at Residential Apartment Buildings in New York State
Electricity usage in residential apartment buildings can be metered in three ways:
- Direct Metering
- Master Metering
As a matter of general understanding, it is useful for property owners and tenants alike to be aware of the distinctions among them.
For property owners who are considering or presently using submetering in a residential apartment building, however, it is crucial to understand the applicable regulatory framework under the New York Public Service Law (PSL). As recent proceedings before the New York State Public Service Commission (PSC) and complaints to its staff arm, the New York State Department of Public Service (DPS), demonstrate, ignorance or disregard of the applicable statutes and regulations can result in time-consuming and expensive tenant complaints as well as penalties and fines.
In a direct-metered building, electricity is supplied to each apartment through a utility-owned meter. Tenants receive an electric bill from the utility based upon actual usage at the utility’s retail residential rate.
In a master-metered building, the utility supplies electricity to the entire building through a utility-owned meter. Individual apartments are not metered, meaning actual consumption cannot be determined or used as a basis for billing electricity charges. Instead, the property owner pays the electric charges based on the building’s master meter reading, with these costs generally being included in tenants’ rent. The building’s electric charges are at the utility’s commercial or bulk residential rate, which is typically significantly lower than the retail residential rate.
In a submetered building, the building receives electricity through a utility-owned master meter, but electricity use in each apartment is measured by a building-owned meter. The building owner then bills electric charges to tenants based on their actual consumption.
According to a report published by the New York State Energy Research and Development Authority, submetering combines the best of both master metering and direct metering. Specifically, “[s]ubmetering permits the measurement of electric use in individual apartments via a building-owned meter that is installed for each apartment. The building continues to purchase its electricity on the less expensive commercial or bulk residential rate basis, but now the owner is able to bill electric to individual apartments on an actual consumption basis."
Generally, a property owner may substitute one form of metering for another, subject to certain regulatory requirements. For example, where a property owner seeks to substitute submetering for master metering, an application containing certain factual recitations must be filed with the PSC pursuant to 16 NYCRR § 96.2(b).
Following PSC permission to submeter electricity at a residential apartment building, the property owner is subject to the Home Energy Fair Practices Act (HEFPA), which includes provisions concerning: *the conditions, timing, and process for terminating or disconnecting electric service *special protections for specified residential customers regarding the termination, disconnection or suspension and restoration of utility service *deferred payment agreements, which allow for the payment of outstanding charges over a specific period of time *voluntary budget billing or levelized payment plan, which are designed to reduce fluctuations in electric bills due to seasonal consumption patterns *content of electric bills *annual notification to tenants of certain rights under HEFPA *procedure/timing for handling complaints by tenants
The PSC recently cautioned property owners concerning HEFPA violations. Specifically, the PSC warned that it expects “submeterers to fully comply with all applicable PSC requirements and PSC rules and regulations, and that we have remedies at our disposal in the event of violations. Were a demonstration made that a submetering landlord was actually unable to comply with HEFPA through lack of capacity or inability to understand his or her obligations, or that the landlord was intentionally failing to comply or intentionally violating HEFPA’s provisions, we could order that remedial steps be taken, suspend or rescind the landlord’s authority to submeter, or seek a penalty from the landlord based on non-compliance with our statute or regulations."
In sum, for property owners who are considering or presently using submetering in a residential apartment building, it is essential to understand the regulatory framework that they are or will be subject to under the PSL. Ignorance or disregard of the PSL and relevant implementing regulations can result in time-consuming and expensive tenant complaints to the DPS and penalties and fines from the PSC. As such, ensuring compliance at the outset and going forward can save property owners time and money in the future.