This summary provides an overview of the more significant changes in the draft revisions to the submetering regulations.

Residential submetering will now be permitted in both existing premises that seek to convert to submetering and in new and substantially renovated buildings.

Notices of Intent to Submeter will be reviewed and approved by Department Staff and confirmed by an abbreviated Commission order. Current requirements that assisted living and senior living facilities obtain a waiver of individual metering requirements is eliminated. Requests to submeter in buildings in which electric heat is submetered and in which more than 20% of tenants receive income based housing assistance and when the owner of a direct-metered premises seeks to convert to submetering will continue to be addressed on a case-by-case basis in comprehensive Commission orders. Filing requirements for both situations have been detailed separately in the regulations.

The regulations clarify in detail submeterers' HEFPA obligations, including filing requirements that demonstrate the applicant is in compliance with all HEFPA provisions.

Submeterers will be required to install meters that comply with 16 NYCRR Parts 92 and 93 in both new construction and when current submeters require replacement. In addition, submetering systems must allow for the termination of submetered electric service to individual units.

Upon publication of initial draft electric submetering regulations in January 2012, the Public Service Commission received comments from American Metering & Planning Services, Inc. & Elemco Building Controls (AMPS/Elemco), Bay City Metering Company, Inc. (Bay City), Hon. Kevin A. Cahill, Chair, NYS Assembly Standing Committee on Energy and Hon. Charles D. Lavine, Chair, NYS Assembly, Administrative Regulations Review Commission (Cahill & Lavine) Car Charging Group, Inc., City of New York (NYC), Coulomb Technologies, Consolidated Edison Company of New York, Inc. (Con Edison), Consumer Power Advocates (CPA), Council of New York Cooperatives & Condominiums (CNYC)¹, Energy Investment Systems, Inc. (EIS), Environmental Defense Fund (EDF), Herbert E. Hirschfeld, P.E. (Hirschfeld), Hon. Micah Z. Kellner, NYS Assembly (Kellner), Minol, Inc., New York State Energy Research and Development Authority (NYSERDA), Real Estate Board of New York (REBNY) and Quadlogic Controls Corporation (QL). As a result of those comments and further Commission review, changes to the January 2012 draft regulations are now proposed. The most notable of these changes include:

(1) Eliminating the requirement that all new and substantially renovated buildings be direct metered and allowing direct metered premises to convert to submetering after certain conditions are met;

(2) Adding notice and hearing procedures for the administrative reduced rate cap remedy when a submeterer violates the regulations, Commission orders, or other law; and

(3) Adding the requirement of an energy efficiency audit when landlords seek to submeter premises heated primarily with electric heat or in which more than 20% of residents receive governmental housing assistance.

Between 2005 and 2009 the Department convened at least five meetings with stakeholders to discuss necessary modifications to the submetering regulations, including one formal technical conference in January 2009. DPS invited written comments as well. The rule adoption process was suspended temporarily in 2008 when it came to the DPS' attention that submetering in electrically heated buildings housing low income tenants required that further tenant safeguards be added to the pending regulations. In January 2012, the Commission issued a Notice of Proposed Rulemaking, again met with numerous stakeholders, and received written comments until April 26, 2012 from the parties listed above.

Statutory Authority:

The Public Service Commission's (PSC, Commission) authority to regulate submetering and to develop the proposed revisions to 16 NYCRR Part 96 is contained primarily in Public Service Law (PSL) § 66(12) and 66(14), which gives the PSC broad authority over electric utility tariffs and rates and service classifications within those tariffs; PSL § 65, which requires the Commission to ensure that electric service is safe and adequate, just and reasonable, and that electric service rates are reasonable; and PSL § 4(1), which assigns the PSC "all powers necessary or proper" to carry out these mandates. Utility tariffs govern the manner in which electricity is provided to each service classification. Master-metered buildings that submeter, are governed by their own service classification standards and requirements and the Commission's authority to govern and interpret tariffs is well-settled. Moreover, in 1951, when the Commission prohibited submetering, a decision that was 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 banned master-metering in new construction because it discouraged energy conservation, which sparked a submetering revival, and in 1988, the Commission adopted submetering regulations, which have been in effect until now. Pursuant to those regulations, the Commission has approved petitions to submeter on a case-by-case basis. Through these unchallenged orders approving submetering, the Commission has, among other things, adopted generic submetering standards that apply to premises in which submetered charges pay for electric heat, with particular attention to premises in which tenants who receive housing assistance reside.

In 2003, the Public Service Law was amended to extend the statutory requirements of the Home Energy Fair Practices Act (HEFPA, Public Service Law Article 2) to "any entity that, in any manner, 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. Submeterers, therefore, are now required by statute to provide tenants all HEFPA protections, including notice of service termination, budget billing, deferred payment agreements, and the remedy of service termination when electric charges have gone unpaid (Matter of Waterside Plaza, LLC, v. Pub. Serv. Commn. of State of N.Y., Slip Opinion (July 3, 2006, Ferradino, J.).

Some commenters have asserted that the Commission has no jurisdiction to implement the regulations. This is simply incorrect. It has also long been resolved that the Commission maintains the authority to regulate the terms and conditions of service classifications, including the submeterer redistribution service classification, through utility tariffs and even to prohibit submetering altogether. Moreover, since PSL § 53 was enacted, the Commission has direct authority to ensure submeterer compliance with HEFPA. That being said, if Commission authority to regulate the service requirements of submeterers or if service classification oversight is ever nullified or found wanting after judicial review, new rules may have to be issued prohibiting or greatly limiting submetered service. While the Commission does not contemplate such action, the protections and safeguards required of submetering customers are indispensable to maintaining the balance between market drivers of the submetering industry and the need to protect submetered end-users.

Legislative Objectives:

A primary legislative objective of the draft regulations is codifying HEFPA's statutory application to submeterers as well as the terms and conditions by which distribution utilities may supply electricity to submeterers pursuant to Public Service Law §§ 66(5) and 66(14).

Current Requirements:

The regulations apply to multi-unit dwellings through utilities' service classification tariffs. The current residential submetering regulations, 16NYCRR Part 96, were adopted in 1988 with minor amendments in 1996. Various 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. One purpose of the proposed regulations is to codify Commission orders that have been issued in individual cases the requirements of which should apply generically to all submeterers.

Needs and Benefits:

In 2003, the Home Energy Fair Practices Act (HEFPA) (Public Service Law §§ 30-51) was extended to submetered customers through the enactment of 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, which submetering advances, and consumer protections when end-users become responsible for paying submeterers monthly electric charges based upon actual usage. It is necessary to update the electric submetering regulations to reflect the changes made by Commission orders, the extension of HEFPA obligations to submeterers and HEFPA benefits to submetered tenants, and to streamline the Department of Public Service's review of routine applications to submeter. The proposed regulations are consistent with these prior determinations and, for the most part, simply implement those requirements in regulatory form.

The draft regulations issued for comment in January 2012 limited the extent to which new construction and substantially renovated premises could submeter. Because utilities have more than 30 years experience with HEFPA and similar tariffed service requirements, the January 2012 draft regulations were based on the strong belief that direct metering best protected end-users. As described below, however, primarily due to the extensive and costly technical limitations associated with the use of direct meters in high-rise residential premises, the revised regulations eliminate this limitation and no longer require all new or renovated construction to install direct meters.

This RIS describes the changes made to the January 2012 draft regulations in response to comments and some of the changes that are not being made despite protests to the contrary. At the outset, the Commission clarifies that the new rules, like all laws, will be prospective. This means that, for instance, (1) currently installed submeters need not be replaced by new submetering technology that allows for service termination but reasonable attempts must be made, if possible, to reprogram submeters to make installed submeters compliant with the regulations. When in-use submeters that cannot be reprogrammed must be replaced, the new submeters must be capable of service termination; and (2) service problems that have already been resolved by binding arbitration will not be disturbed; however, current lease agreements that include binding arbitration as a remedy were deemed against public policy when PSL § 53 was enacted; binding arbitration was made void by that 2003 statutory requirement.

Prohibition of Submetering in New Construction

By far, the most comments received during the SAPA comment period concerned the reasons the PSC should not require direct metering in all new construction and premises that are substantially renovated. While the majority of commenters opposed the requirement because they believe it foretells the demise of the submetering industry, technical and cost considerations have led the Commission to now propose that direct metering not be required, nor submetering be prohibited, in all new construction and substantial renovations.

The January 2012 draft regulations proposed exceptions to the prohibition on submetering in new construction that were believed to be the only necessary accommodation to the continued use of submetering by allowing for submetering after proof of energy efficient and demand response programs that depended upon submetering. Con Edison, however, explained that costly technical improvements would be required if high-rise, multi-use premises used direct metering for each residential unit. As Con Edison explained, it is not uncommon for large residential buildings constructed or renovated in Con Edison's service territory to contain retail and non-residential space in the first few floors and residential apartments in the upper floors. Developers of these large buildings often request higher voltage supply from the Company due to their expected high demands (460 volt (v) service as opposed to 120/208v service). According to Con Edison, service at the higher voltage saves developers significant costs during construction, makes it easier for the building to meet code requirements for acceptable voltage drops and is more environmentally friendly. Con Edison may also require service to be taken at 460v when warranted by the magnitude or location of the load or when it would result in the least cost to the Company, thereby reducing costs for all Con Edison ratepayers.² In each of these scenarios, Con Edison states that it is unable to provide direct metering of the residential areas of the building or premises in lieu of submetering. Requiring Con Edison to install additional, low tension services to residential areas within these mixed-use premises would: (1) eliminate part of the Company's savings from providing a single service to the building; (2) undermine Con Edison's current ability to require high tension service in accordance with Con Edison's tariff; and (3) cause the customer higher costs to redistribute electric service to residential units on the upper floors of the building.

Further, submetering is a less expensive alternative to direct metering. For instance, the size of direct meter rooms are vastly larger than the space required for submeters, resulting in the loss of usable (i.e. leasable) space. Commenters estimate that direct meter rooms must be at least 360 cubic feet while submeter rooms require only 64 cubic feet of space for the same number of residential units. Similarly, comments show that the cost to install direct meters is estimated to be at least $200 more per apartment because direct meters are individually wired.

Staff's further review of the technical limitations of installing direct meters in multi-use high-rise buildings has ultimately led to the conclusion that submetering in these buildings provides the least cost technology to provide individual metering. Moreover, as Con Edison points out, "the provisions [contained in the draft regulations] provide sufficient consumer protections; [therefore] it is not necessary to establish an outright prohibition on submetering in new or substantially renovated buildings."

To the extent the Department has considered submeterers' concerns that, in general, other aspects of the proposed regulations increase submeterers' costs, such as providing HEFPA protections and meter tests, it is important to keep in mind a number of things. First, creating a structure that balances the needs of end-users and the industry advances submetering by securing dependable service and even in encouraging technical advances in the industry. Second, with the exception of buildings that are regulated by HCR and HPD, most building owners retain as profit the margin between what the tenant is billed and what the utility charges the landlord. The differential between these two rates provides an adequate financial cushion for submeterers to comply with the new regulatory requirements. In advocating to eliminate the direct metering requirement, commenters referred often to this rate differential, stating it is passed back to customers. Consistent with this claim, therefore, it is reasonable to presume that any added administrative costs due to the application of PSL § 53 to submetered services may reduce the savings to customers that are typically passed back. But, given the large differential submeterers cite, it is not likely to cost landlords more. Third, submeterers (including building owners who serve HCR and HPD housing populations), may take advantage of financial incentives, such as participation in demand-response programs, by which submeterers may (1) curtail usage in common areas during peak usage periods and obtain what can be a substantial monetary benefit for such curtailment; (2) avoid costly investment in capacity expanding equipment to accommodate increased electrical usage; (3) avoid the burden of absorbing increased electric utility costs in rent, such as air conditioning and other high-use tenant activity; and/or (4) enlist in New York State Energy Research and Development Authority (NYSERDA) programs that provide rebates and other financial support to offset the cost of submeter installation and energy efficiency measures.

At the same time, the new draft regulations allow that currently direct metered premises may be converted to submetering when a premises owner submits a Petition to Submeter with proof of enrollment in a demand response program or the installation of co-generation equipment on site or advanced energy efficiency equipment. Inasmuch as what constitutes "advanced energy efficiency equipment" will change as technology improves, we cannot determine now, nor will we limit, exactly what will be acceptable technology when seeking approval to switch from direct meters to submeters.

In sum, the filings for whom the Commission will treat as prima facie filings in the public interest are now called "Notices of Intent to Submeter." Notices of Intent to Submeter may be filed for all submetering conversions, as long as electric heat is not going to be submetered, and all new construction, including new construction in which electric heat will be billed. Petitions to Submeter will require additional documentation to prove such submetering is in the public interest. Petitions to Submeter will be required for premises converting to submetering at which electric heat will be submetered and for conversions of direct metered premises to submetering, which must include a showing of advanced energy efficiency equipment or on-site cogeneration to justify the conversion.

The Return of Commission Orders Approving

Condominium and Cooperative Submetering

The January 2012 proposed regulations removed from current regulations the heretofore distinction between condominiums/ cooperatives (condo/coop) and rental properties when the building manager proposes to install submetering. Rather than requiring submetering approval for condo/coops, since 1988, DPS has relied upon the internal legal agreements and procedures between condo/coop owners and management in any transition to submetering. Some stakeholders commented that this ability of a condo/coop to self-govern was removed from the regulations for no reason; one party indicated that removing the distinction would prolong the process for converting a coop/condo from master metering to submetering.

We have not modified the January 2012 proposed regulations that require submetering approval for coops/condos. Our intent in requiring condo/coops to follow the newly developed, abbreviated, Notice of Intent to Submeter procedure in the proposed regulations was to ensure that HEFPA is enforced whether a premises is a coop/condo or a "pure" rental premises. Requiring the simpler Notice of Intent to Submeter was intended to be the least burdensome way to accomplish this goal. Because submetered condo/coop residents now enjoy the same HEFPA protections as submetered rental tenants, DPS can only enforce the rights of condo/coop residents, and ensure notification of those rights, if the Commission is on notice of a condo/coop decision to submeter.

Commenters state that internal by-laws and regulations adequately govern coop/condo submeterer accountability. First, the DPS has found this not to be wholly accurate. DPS Staff handle numerous condo/coop complaints between owners, tenants, and Boards of Managers. Therefore, the benefit of a Notice of Intent to Submeter to tenants/owners is clear: if the Commission knows when a coop or condo becomes submetered, the Commission can better protect end-users in billing and service complaints by enforcing the commitments made in the Notice of Intent to Submeter and by applying the conditions required of submeterers in the regulations. That being said, it is not our intention to interfere with internal coop/condo procedures for resolving complaints. Indeed, HEFPA requires all submeterers to resolve customer disputes internally before an end-user may bring a complaint to the Department. Therefore, Commission oversight of coop/condo complaints will be limited to only those instances when internal by-laws and regulations insufficiently respond to end-user problems. Finally, commenters complain that a 60% rate cap reduction will hurt end-users because Boards use the rate cap differential to pay for other building expenses. If a Board of Managers that repeatedly violates our regulations or HEFPA becomes subject to the 60% rate cap, the Board may be forced to shift to all owners added costs that had previously been subsumed into the higher rate cap. Owners, in response, may note the added expense and take action internally to address this problem if it arises.

Other commenters believe that coops/condos should be exempt from providing the Commission details of their submetering plan. While the Commission does not intend to interfere with the internal obligations of coop/condos, without certain information, the Department cannot determine the consistency or accuracy of bills to resolve those consumer complaints that come before the Department because they have not been resolved internally at the coop/condo.

Finally, treating all condos/coops the same as rental properties obviates ambiguity in the existing regulations by which, for example, existing condo/coops may submeter without Commission approval under certain circumstances while new condo/coops are required to seek Commission approval prior to submetering. The rules for all condos/coops are now consistent.

Termination of Electric Service

The earlier, August 2011, draft proposed regulations required that, as a condition to submeter in all future submetering petitions, the submeters to be installed be capable of terminating electric service to individual units. Some parties continue to object to this requirement. First, while such submeters may now be "rarely used," the Department has been told on many occasions, and indeed, petitions to submeter are pending that seek to install submeters capable of service termination. Therefore, comments claiming that submeters that include the ability to terminate service do not exist are simply incorrect.

Second, the City of New York claims that the proposed requirement that submeters be capable of service termination "could" conflict with established landlord/tenant law. Offering no citation to support this claim, the City suggests that HEFPA "may violate the spirit" of Real Property Law § 235-b, which creates a statutory right of habitability for all tenants. In response, first, the statutory requirements of HEFPA guarantee the remedy of service termination to end-users when bill payments are delinquent.³ These regulations implement that statute. Second, direct metered tenants are entitled to the remedy of service termination after all HEFPA complaint procedures are completed; therefore, submetered tenants should be entitled to it as well. Third, HEFPA provides landlords a complete defense if a tenant, after failing to pay the electric bill, claims a Real Property Law § 235-b breach of habitability. Looking at "[e]ach case. . . on its own," courts are unlikely to credit a tenant claim that RPL § 235-b has been violated if the submetering landlord has followed HEFPA, which provides extensive consumer complaint procedures, including not shutting off service while a tenant complaint is pending. See Suarez v. Rivercross Tenants' Corp., 107 Misc. 2d 135 (1st Dept. 1981]; see also L. 1975, ch. 597, NY Legis. Ann, 1975, p. 437, Governor's statement [RPL § 235-b intended to remedy inequities].

Some Commenters stated that submeters that are technically capable of service termination submeterers would be "cost prohibitive" but provided no further explanation. While perhaps more expensive than submeters not capable of service termination, such advanced submeters are on the market, submeterers are installing them, and reprogramming or rewiring can make many submeters capable of service termination. In that replacement is not the only alternative to compliance with the service termination requirement, it is an exaggeration to say such a requirement is cost prohibitive. Finally, to allow for service termination, it may be that leases will have to be modified to allow, when necessary, submetering landlords to enter apartments to access the submeter after HEFPA procedures have been followed.

It bears repeating that not requiring service shut-off capability could be misinterpreted as a DPS endorsement of eviction as an acceptable remedy for non-payment of electric charges. For these reasons, DPS has not modified the January 2012 proposed regulations requiring submeterers to install equipment that is capable of service termination to individual units.

Finally, commenters apparently misread the regulations in expressing concern that submeters will have to actually be placed inside apartments. The regulations state that submeterers must be "accessible," which means submeters must, at least, be located where tenants may view them upon request.

Billing Periods

The August 2011 proposed regulations required that submetered electric service billing periods largely coincide with utility billing of the master-metered service billing periods by specifying that bills to submetered customers be sent within five days of the submeterer's receipt of the utility bill. No commenter disagreed with the newest revision to billing period requirements.

Commission Remedies For Submetering Violations

Commenters complained that the Department's use of a 60% rate cap reduction as a remedy for submeterer violations (1) lacks justification; (2) is "arbitrary and unnecessary"; (3) should be eliminated or reduced; and (4) requires enunciated procedural steps prior to the reduction being enforced.

We are changing the draft regulations to clarify that, prior to a Departmental requirement that the rate cap be reduced by up to 40% for submetering violations (1) a Department investigation will have been conducted, after which the Department will notify the submeterer with a Notice of Alleged Violations describing the Department's proposed changed rate cap; (2) the submeterer will then have 15 days to dispute, cure, or otherwise respond to the Department based upon the DPS investigatory findings; (3) if, within 20 days, the Department finds that such violation has not been cured or has continued for such a duration that a remedy is warranted, DPS shall send to the submeterer a Notice of Rate Cap Reduction; (4) within 15 days of receiving a Notice of Rate Cap Reduction, the submeterer may appeal the Department's Notice of Rate Cap Reduction to the Commission. The reduced rate cap will not be enforced until all appeals to the Commission have been exhausted.

The section that allowed the Commission to adjust the rate cap "for good cause" has been removed from the draft regulations as unnecessary since the Commission's authority to adjust a tariff provision and enforce tariffs must always pass the test of reasonableness. By the same token, the Commission's authority to interpret tariff requirements, of which the reduced rate cap will become one, has been upheld repeatedly, as has the Commission's authority to authorize tariff refunds going back two years when warranted. Moreover, the rate cap adjustment is similar to other remedies that exist in tariffs when a customer fails to abide by their service classification requirements. For instance, when interruptible customers fail to curtail load in accordance with the requirements of their service classification, the customer is subject to a tariff penalty. Inasmuch as the Commission created and has always authorized submeterers to retain 100% of the rate margin, authorizing a reduced rate cap differential when a submeterer has violated a utility's redistribution tariff (into which these regulations will be incorporated), after notice and an opportunity to be heard, is reasonable.

Finally, pursuant to recent legislation, if a submeterer fully cures the alleged violation within 30 days, the submeterer may avoid the imposition of the reduced rate cap altogether. Indeed, it is the Commission's primary objective to ensure that what appears to be a submetering violation is cured; as a practical matter, therefore, it will be only those submeterers who are flagrant in their abuse of the submetering service classification requirements for whom a 60% rate cap will be assessed.

COSTS

Costs to Private Regulated Parties:

As noted in the previous SAPA notice, the statutory requirement that submeterers abide by HEFPA will add somewhat higher operating costs, which recent comments support are recoverable from the bulk and residential rate differential as well as other programs. In any event, to comply with the Public Service Law, such added costs are unavoidable. In particular, commenter claims that meter testing will be unduly costly are addressed below.

The proposed regulations now require that landlords who want to submeter premises primarily heated with electric heat and those at which more than 20% of residents receive income-based housing assistance must complete an energy audit by a certified auditor. With this added requirement, the Department believes that the safeguards in the draft regulations further balance the need to protect these resident subgroups while not losing altogether the energy efficiency opportunity that price signals provide to encourage conservation for people who pay for electric heat.

Other parties continue to maintain that submetering of electric heat should be banned altogether. An outright ban on submetering in buildings whose heating systems are electric, however, could remove significant opportunity for energy efficiency, since heating with electricity uses so much energy.

Submeters To Comply with 16 NYCRR Parts 92 and 93

The proposed regulations continue to require that the quality of future installed submeters be the same as that required of regulated utilities by requiring that submeters meet the regulatory standards defined in 16 NYCRR Parts 92 and 93 and that submeterers conduct routine meter testing, which is required currently of regulated electric utilities. In response to the January 2012 draft regulations, commenters continue to claim that the requirement of annual testing of submeters will unduly add to submeterers' costs. First, the concern over the extent to which costs will increase for meter testing is exaggerated. Parts 92 and 93 of 16 NYCRR require annual, random testing of submeters consistent with the American National Standards for Inspection and Attributes (ANSI) Z1.4, which recommends accuracy and stability measures for testing. Those standards require that only 8% of submeters at each premises be tested annually (80 submeters out of 1000). Even then, it is only when a subset of those 80 submeters fails that replacement of the failing submeters is necessary. Moreover, virtually all in-service meters take less than 15 minutes to test, which, with 1000 submeters, translates to a requirement of three days of testing per year to ensure meter accuracy. Second, the need for submeter accuracy cannot be overstated. As recently as 2008, three complaints brought to our attention that one landlord had installed in 2005 submeters that were found to over read usage up to 100%. Use of such meters resulted in end-user bills that were twice what they should have been. Moreover, the draft regulations require that in-service submeters read electric consumption within 2% of actual use. Even at 2% accuracy, a $150 electricity charge from a submeterer allows the submeterer to collect an additional $2.50 per month, per end-user. In a 1,000 unit premises, a landlord will overcollect (and some perhaps have been overcollecting) $2500 per month, or $30,000 per year. Third, claims that all submeters will have to be replaced to meet accuracy requirements is incorrect. Only if an in-service submeter cannot be reprogrammed, rewired, or recalibrated to meet the accuracy requirements will replacement be necessary. Moreover, as a practical matter, replacement will occur gradually, as failed submeters are detected during annual random testing or due to consumer complaints.

Some stakeholders indicated that these requirements would be expensive to implement and that routine testing in particular would be difficult to accomplish where meters are located within individual dwelling units. HEFPA provides a remedy when an end-user continually fails to provide access for meter testing. In the future, landlords should take the testing requirement into account when deciding where to install submeters.

Costs to Local Government:

There are no costs to local government.

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

The proposed revisions would impose no new costs to the Commission or Department.

Costs to Other State Agencies:

There are no costs to other State agencies or offices of State government.

Local Government Mandates:

The proposed revisions do not impose any 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 submeterers' filing and processing requirements except in rare circumstances (when electric heat is provided at the premises to be submetered and when 20% of the tenants living at a premises receive income based housing assistance). The proposed revisions also eliminate the need for assisted and senior living facilities to petition for a waiver of individual metering requirements.

Duplication:

There are no relevant State regulations which duplicate, overlap or conflict with the proposed revisions. To the extent rules applicable to the Division of Housing are impacted, a conflict of law provision was added that defers to such other housing assistance program requirements.

Alternatives:

No other suitable alternative has been identified. In the January 2012 draft regulations, the PSC forbade submetering in new or substantially renovated construction unless certain conditions were met. In response to comments opposing that prohibition, we have revised the rules to allow submetering in new and substantially renovated construction. Similarly, Commenters sought specific administrative procedures when a reduced rate cap may be imposed; the revised regulations respond to that request by adding further notice and opportunity to be heard. The service termination requirement, meter testing and the need for Commission orders authorizing coop/condo submetering, however, are all unavoidable to ensure compliance with Public Service Law § 53.

Federal Standards:

The proposed revisions are not impacted by any standards of the Federal government except that federal energy efficiency standards set the bar for the need for refrigerator replacement in the transition to submetering.

Compliance Schedule:

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

¹ CNYC comments include the position of the Federation of New York Housing Cooperatives, Coordinating Council of Cooperatives, Association of Riverdale Cooperatives, and Urban Homesteading Assistance Board.

² See Con Edison P.S.C. No. 10, Schedule for Electric Service (“Con Edison Tariff”), General Rule 4.3

³ Real Property Law § 235-b, which establishes a statutory Warranty of Habitability, states, inter alia, “When any such condition [alleged to violate the warranty of habitability] has been caused by the misconduct of the tenant or lessee or persons under his direction or control, it shall not constitute a breach of such covenants and warranties.” On its face, therefore, the statute protects a landlord when it is the tenant's failure to pay electric charges that leads to service termination.

Effect of Rule:

During the initial SAPA period, commenters claimed that the new rules add burdens to submeterers, such as added paperwork, that the original SAPA notice did not address. First, virtually all of the information required in the proposed regulations is being collected now from submetering petitioners pursuant to Commission orders or Departmental practice. Second, the Notice of Intent to Submeter procedure creates a rebuttable presumption that the planned submetering is in the public interest after a one-time filing of information that is necessary primarily to abide by Public Service Law §§ 30-53. For those who seek to submeter electric heated buildings, Commission experience has shown that energy audits and shadow billing studies or history is necessary to protect residents.

Other comments claim that the limited prohibition on future submetering would have a deleterious effect on the City of New York and its energy efficiency initiatives. Having become aware of the City's initiatives, the Department revised the rules allowing submetering to continue. That being said, SAPA's Regulatory Flexibility Analysis For Small Businesses and Local Governments "only requires that a Regulatory Flexibility Analysis consider those persons and entities that are directly affected by the Rule, not on all small businesses that might experience some indirect economic effect of the Rule because of the application of the Rule to others." See, Pacific Salmon Unlimited v. New York State Department of Environmental Conservation, 208 AD 2d 241, 622 N.Y.S.2d 820 (3d Dept. 1995).

The new regulatory requirements for meter standards will actually benefit small business landlords in that the rules establish standards for accuracy of submetering equipment, which avoids the situation in which a landlord becomes financially responsible for the added costs of having installed faulty equipment. Moreover, better accuracy requirements will increase business opportunities for companies that supply and install the most reliable submetering equipment while only reducing the business opportunities of sellers of faulty equipment. Finally, any added paperwork in the new regulations stems from the fact that HEFPA applies to submeterers and the Public Service Commission is only implementing that statute.

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 bifurcate the Department of Public Service's review of routine 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 required of all submeterers by virtue of the Public Service Law; include energy efficiency goals; and require the use of submeters that meet the same reliability standards as direct metered customers. Finally, the revised regulations specify that electric vehicle charging stations are not subject to submetering service classification requirements.

Professional Services:

Only petitioners who seek to submeter electrically heated premises or who intend to submeter premises in which more than 20% of residents receive income-based housing assistance will be required to engage a professional energy consultant to audit the premises for energy efficiency improvements. Such a requirement is deemed necessary because electric heat is so expensive and when end-users become responsible for paying for electric heat through submetering, every measure to minimize those costs should be required. Similarly, residents who receive income based housing assistance are more vulnerable than the population at large; an energy audit prior to submetering provides added assurance that they will be protected from paying higher than necessary electric bills.

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 submeters that comply with 16 NYCRR Parts 92 and 93. Moreover, the use of accurate submeters and the cost to test 8% of submeters annually balances the needs of submetering landlords who are able to shed the ever-increasing cost of electricity and end-users, for whom accurate billing is safeguarded by HEFPA. 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 to upgrade or improve submeters may be recoverable. While some commenters claim that the rate differential between master-metered service and residential service will not cover the added costs of HEFPA compliance, the ability to cover administrative costs in a decision to switch to submetering is but one of the many factors to be considered in such a transition.

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 programs that offer financial incentives, sometimes in the tens of thousands of dollars. The required use of accurate submeter technology is necessary to provide end-users with the same accuracy of their electric usage as direct metered customers, both of whom are protected by the statutory requirements of HEFPA.

Minimizing Adverse Impact:

Further review was conducted to consider other approaches to mitigate adverse economic impact as suggested in the State Administrative Procedure Act Section 202-b(1). Most notably, the newly proposed regulations no longer include the prohibition of submetering in new or substantially renovated buildings. The Notice of Intent to Submeter is expected to expedite review and approval of the majority of requests to submeter. In response to earlier 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 numerous occasions. The Department of Public Service sponsored a technical conference on January 20, 2009, accepted informal written comments and spoke on many occasions with the City of New York, submeterers, and submetering equipment providers.

(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 HEFPA, the regulations or order approving submetering (for which an opportunity to cure has been provided), Staff may adjust the submeterer's rate cap downward by up to 40%, an administrative action that is appealable to the Commission.

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.

A job impact statement is not submitted because this proposed rule will have no adverse impact on jobs or employment opportunities. Comments on the January 2012 draft regulations claimed an adverse impact on jobs solely due to the proposed prohibition of submetering in new or renovated construction. Inasmuch as that prohibition has been removed from the proposed regulations, a job impact statement remains unnecessary. In any event, the January 2012 comments support the possibility of added jobs due to the continuing expansion and increased technological sophistication of submetering systems.

As listed in the Revised Regulatory Impact Statement, public comments were received from more than 20 parties, including legislators, submeterers, the City of New York, and Consolidated Edison Company of New York (Con Edison), under whose tariff submetering is primarily provided. In response to the comments received, the Department is recommending that submetering be authorized even in new and substantially renovated construction, which was prohibited in the first published draft regulations. Moreover, procedures have been added to Sections 96.2 and 96.8 of the draft regulations to provide notice and an opportunity to be heard before the Department requires any reduction in the authorized rate cap in response to submeterer violations of HEFPA, the Commission order authorizing submetering, the submeterer's plan upon which Commission authorization is based, or the terms and conditions of submetered service as embodied in the regulations. The rate cap remedy, while now described as a reduction of "up to 40%" of the current rate cap, has been retained and may be assessed when a submeterer fails to cure any violations of the statute, orders, or regulations. The reduction amount is now a variable percentage that Staff will determine based upon the egregiousness or longevity of a submeterer's violation.

The revised regulations attempt to more clearly delineate when it is appropriate to file with the Commission a Notice of Intent to Submeter or a Petition to Submeter; what service requirements will be expected of all submeterers, such as meter testing and HEFPA notices; and what new submetering notices and petitions must include.

Con Edison recommended that owners of residential rental facilities where 20% or more of the tenants are low income participants and/or have electric heat be required to provide an energy audit, completed by either NYSERDA or a certified energy audit provider (e.g., a utility or third party certified by NYSERDA or utility). This requirement has been added.

For the reasons stated in the Revised Regulatory Impact Statement, many sections of the revised residential submetering regulations have not been changed. These include, but are not limited to: (1) the requirement that condominiums and cooperatives file a Notice of Intent to Submeter because, by virtue of Public Service Law § 53, HEFPA applies to all submetered end-users and such filings are necessary to the Commission's enforcement of HEFPA; (2) the requirement that new submeters be capable of service termination because the remedy for unpaid electric charges envisioned by HEFPA is service termination. This requirement specifically applies to submeters that are installed to replace current equipment; (3) the requirement of a regular submeter accuracy testing program within the meaning of 16 NYCRR Parts 92 and 93. These sections enunciate parameters within which submeters must operate to avoid end-users paying for inaccurately "measured" electricity that they simply have not used; (4) a change to the refrigerator replacement requirements. Pursuant to the EPA's own rules, before the EPA may enact new energy efficiency standards, the proposed standards must show that the cost of purchasing the refrigerator will be recouped in electric savings over the life of the refrigerator. Since the federal regulations already test the cost/benefit of refrigerator replacement, the current language has been retained as reasonable.

(11-M-0710SP2)