PUCO reins in ‘submeter’ billing

An era of unfettered price gouging might be over for residents of apartments and condominiums served by “submeter” companies.

Ohio utility regulators ruled Wednesday that these companies can charge no more than households would pay to their regulated utility for electricity and water, with a few exceptions.

The unanimous ruling by the Public Utilities Commission of Ohio affects previously unregulated submeter companies, which buy electricity and water at a bulk discount and resell them to some apartment and condominium complexes. They were set up to be outside the reach of consumer protections.

This is a notable change, years in the making, following the Dispatch’s 2013 reporting about the

existence of these practices, and the state investigation that followed two years later.

“It is our hope that today’s commission decision will serve to protect customers by disciplining pricing in the submetering marketplace and providing a true venue for submetered residential customers to file their grievances,” said Asim Haque, the PUCO chairman.

But some of the people and groups who wanted to see new rules say the PUCO didn’t go far enough. And appeals are expected. Among the details:

If the PUCO finds that a submeter company is in violation of the new rules, the penalties could be severe, including a potential order that the company transfer the affected housing complex so that it is served by the regulated utility.

Extra billing fees no longer would be allowed if the fees lead to a total bill that is more than a customer would pay to the regulated utility.

Consumers who think they are being overcharged can contact the PUCO call center, 1-800686-7826, for help.

The decision has at least three items that could be viewed as exceptions to the underlying pricing rules:

Common-area charges, such as for hallway lighting, could continue to be allowed on bills, but without a markup. These charges would not count in the comparison with regulated bills.

If a submeter company’s actual costs for utilities lead to bills that are higher than regulated prices, the company could

charge customers more than regulated prices, as long as the cost has no markup. Haque said this is intended to be a narrow provision to account for unusual situations that might come up, such as quirks in billing cycles.

The decision covers only households; it excludes businesses served by submeter companies. Some of those businesses asked to retain their current system.

Columbus-based American Electric Power, a regulated utility that has been a vocal critic of submeter companies, had this response:

“This decision does not go far enough to protect consumers from the harmful and unregulated practice of reselling utility service for a profit,” said spokeswoman Tammy Ridout in an e-mail. “The decision will allow submetering companies, which purchase utilities at a bulk rate, to continue charging a substantial markup to customers — up to 45 percent — rather than passing the lower rate along to tenants.”

In contrast, Nationwide Energy Partners, a Columbus-based submeter company, was pleased with the ruling. CEO Gary Morsches said his company already has a policy of charging no more than regulated prices, adding that the PUCO “has made the right decision to protect consumers.”

The next step is that participants in the case can ask the commission to reconsider parts of the decision. The PUCO then would rule on those petitions. After that, parties could appeal to the Ohio Supreme Court.

With this ruling, a customer can contact the PUCO for help in determining whether a submeter company is overcharging. If the company resists

attempts to fix problems, the next step would be for the customer to file a formal complaint. A formal complaint is a lawsuit-like process that can take years to resolve.

Earlier reporting showed that submeter consumers were paying high bills for electricity and water, and that the pricing method would be illegal in most states.

The PUCO, responding to consumer complaints, began an investigation in 2015, leading to a ruling that it has jurisdiction to regulate submeter companies. Wednesday’s decision spells out some specifics of those rules.

Even with the new restrictions, submeter companies still can be profitable because they buy electricity and water at a bulk discount.

Meanwhile, the Office of the Ohio Consumers’ Counsel had a measured response: Spokesman Dan Doron said his office appreciates aspects of the ruling but has concerns that underlying problems might remain.

The PUCO is one of several venues in which there is a push to regulate or enforce current law on submetering. There are bills in the General Assembly, and a proposed class-action lawsuit is in Franklin County Common Pleas Court.

State Rep. Mike Duffey, R-Worthington, the sponsor of one of the bills, said the ruling doesn’t go far enough for a number of technical reasons. He said the submeter companies’ bulk-buying is a distortion of the system that leaves expenses that get picked up by other customers of the regulated utility.

Because of that, he thinks legislation is still needed.