Utility Management: Legislative and Regulatory Update
Here’s the latest in multifamily utility billing compliance for the states of California, Ohio and Texas:
California Senate Bill 7 (SB 7) was signed into law in 2016 by Gov. Jerry Brown. By its terms it becomes effective as of Jan. 1, 2018. All properties that request a water connection from a water utility after that date must demonstrate that the units at the property will contain submeters to measure water consumption.
Additionally, multifamily operators must include specific language in their lease disclosures for water and sewer billing and may need to modify existing submetered set-ups to comply.
As background, In Sept. 2013, the Columbus Post-Dispatch ran a series of articles highlighting multifamily owner/operators who were “marking up” rates that they charged their residents for electric service and allocating more than their expense to residents. Legislators introduced three separate bills in 2014 to regulate “submetering companies” in different forms. None of these bills made it out of committee.
In 2016, the legislature introduced two new bills to regulate utility billing performed by landlords to residents. As in 2014, these bills did not make it out of committee. Apartment associations and billing vendors attempted to jointly craft language with the Office of Consumer Counsel to address recovery and consumer protection interests. Unfortunately, these efforts did not produce a bill that could advance in 2016. The Public Utilities Commission of Ohio (PUCO) opened a generic investigation into “submetering” earlier in 2017 where it found that landlords that are only recapturing their expense and not marking up charges or rates, operate within the guidelines of Ohio law and PUCO regulations.
In its findings, PUCO stated that a legislative solution is the best way to ensure fairness and transparency to utility end-users. Currently, there are two bills in the Ohio Legislature. House Bill 249 was introduced by Rep. Mike Duffey (R) on June 1, 2017. This bill limits the amounts that multifamily operators can recover to the “standard service offering” in the utility territory. That amount “may” be less than the actual costs that a property incurs for a billing period. HB 249 specifically prohibits all “common area” billing, as well. However, HB 249 does not create a statutory scheme regulating utility billing. HB 249 directs PUCO to promulgate regulations regarding the practices. This bill is currently in the Public Utilities Commission (PUC).
Senate Bill 157 was introduced on June 15, 2017 by Sen. Kevin Bacon (R). It is currently in the PUC. This bill limits recovery to “market-based rates” that effectively caps at the amount that a resident would be charged if they were customer of record for the utility. The bill specifically allows for submetered billing, flat rate, and allocated (RUBS) methodologies. However, the bill places a limitation on fees. Only one monthly administrative fee can be charged—but not account set-up or final bill charges. This bill specifies penalties for non-compliance at three times the amount of any overcharge.
In 2016 the Texas Public Utilities Commission (TPUC) took over responsibility for regulating landlords who bill residents for water and sewer services from the Texas Commission on Environmental Quality (TCEQ). TPUC adopted the existing TCEQ regulations for water and sewer billing and intended to keep them in place for one year and then hold a rulemaking to overhaul the regulations. This will represent the first wide-ranging changes since 2003. Upon information and review, TPUC will hold a larger rulemaking in 2018.
In the interim, TPUC is convening a limited rulemaking in the near future to deal with Texas Senate Bill 873, which was signed into law on June 1, 2017. SB 873 obligates TPUC and the State Office of Administrative Hearings to establish an online and telephone complaint and hearing system and grants jurisdiction over resident claims to the TPUC and modifies the available penalties for violations.
Michael Foote is vice president, legal/utility billing compliance at RealPage. Mike joined the RealPage legal team through the 2016 acquisition of NWP Services Corporation, where he had been the director of regulatory services, having joined NWP in 2008. Mike’s expertise in utility billing law has been gained over his more than 17 years exclusively practicing in this area.