Assembly Bill A7353

                                BILL NUMBER:A7353A

TITLE OF BILL:  An act to amend the public service law, in relation to
the collection of charges for residential utility service deemed to be
rent

PURPOSE OR GENERAL IDEA OF BILL: Bill would ban the deeming of charges
for  electric  service provided by the landlord to residential tenants
to be "rent".

SUMMARY  OF  SPECIFIC  PROVISIONS:  This  bill  would  establish   the
following provisions:

* Creates section 75 -a 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;

* Act taking effect immediately.

JUSTIFICATION:  The Public Service Commission has plenary jurisdiction
over the sale or distribution of electric service under § 5.1.b of the
public  service  law.  Under  the public service law, the provision of
electric service by  a  landlord  to  a  tenant  is  recognized  as  a
              

permissible  activity  only  by "a railroad or street railroad ... for
the use of its tenants and not for sale to others." Public Service Law
§2(13).  The issue whether a residential landlord - who is  neither  a
railroad  nor  an electric corporation - can lawfully sell electricity
to its tenants has been questioned in the lower  courts  but  has  not
been  decided  by  the  court of appeals. (See, e.g., Owners & Tenants
Electric Ca., Inc. v. Tractenberg 158 Misc. 677, at 679  -  680  (Mun.
Ct. N.Y. City 1936)).

In 1951 the Public Service Commission (PSC) prohibited all residential
electric  submetering, calling the practice "parasitic." That decision
was upheld in the 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 subrnetering was again  allowed  by  the
PSC  on  a  case by case basis, mainly for residential cooperative and
condominium projects, where tenants have an ownership  and  governance
interest.  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,  The  PSC  allows  landlords  to  provide  submetered
electric  service  on  a  deregulated  or  loosely regulated basis and
allows landlords to collect charges for unpaid service  by  actual  or
threatened  eviction.  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  rented  with  utility
service  included  in  the rent to change the terms of leases so as to


shift responsibility for payment of electric charges from landlords to
tenants.

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 Article 2of the public service  law,
the  Home Energy Fair Practices Act (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-s 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, 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
alternative  to  complying  with  the  Home  Energy Fair Practices Act
(HEFPA):

There are two potential remedies for an owner if a resident  fails  or
refuses  to  pay  submetered  electric  charges. One is to discontinue
supplying the electric  service.  The  other  is  to  sue  for  either
recovery of the unpaid amounts or eviction.

As  noted  in  the section discussing PSC requirements, New York State
has extensive regulations in place to protect residents against  their
electric  service  being  shut  off.  An owner seeking to continue the
tenancy while discontinuing the service will most likely  be  required
to   comply  with  all  tenant-protection  regulations  applicable  to
utilities for discontinuing the service. These include various  notice
and  payout requirements and protections for the elderly and disabled,
which are time-consuming, burdensome to the  owner,  and  inconsistent
with   continuation   of   the   rental   tenancy.  Moreover,  special
arrangements with respect to electric  charges  are  likely  to  cause
confusion  in  billing  and collection procedures. As a result, owners
may want to consider legal action for  eviction  of  the  resident  or


recovery  of  unpaid  amounts as the primary enforcement mechanism for
nonpayment of submetered electric charges.

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,  rather  than  provide
detailed  HEFPA  notices  to  the  elderly  and disabled 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 bands of  an  owner  who  provides
monopoly   utility   service   under   PSC   orders  is  resulting  in
displacement, hardship and injustice.to submetered  tenants,  who  are
often  unrepresented in court proceedings, and is adding to the burden
of the courts. One example of a landlord's lease with  such  a  rider,
that was approved for submetering by the Commission, reads as follows:
'The  electricity  charges  will be billed to the Tenant as additional
rent and will  be  payable  on  a  monthly  basis  by  the  Tenant  as
additional   rent.   Tenant   specifically  understands  that  if  the
electricity charges are not paid in full on a  monthly  basis  by  the
Tenant, that the Landlord may commence a summary proceeding to recover
a  money judgment and a judgment for possession against the Tenant and
that the Tenant can be evicted from the apartment for, failure to  pay
electricity charges."

Some  courts  have prohibited submetering landlords from tea-inflating
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  public
service  commission's  complaint  handling  and decision process under
HEFPA, i.e., section 43.2.

PRIOR LEGISLATIVE HISTORY: None.

FISCAL IMPLICATIONS: None is anticipated.

EFFECTIVE DATE: This act shall take effect immediately.