Senate Bill S5041

                                 BILL NUMBER:  S5041

 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 :

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
Co., 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. niv.
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 submetering 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 2 of 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 protection 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 hands 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 terminating
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 :

2015-16: Referred to Energy and Telecommunications (S.7991)
2013-14: Referred to Energy and Telecommunications (S.1231)
2011-12: Referred to Energy and Telecommunications (S.1396)
2009-10: Referred to Energy and Telecommunications (S.4748A)

 FISCAL IMPLICATIONS :

None are anticipated.

 EFFECTIVE DATE :
This act shall take effect immediately.