The Ohio Supreme Court in April issued a landmark opinion on a long-running conflict, ruling that submetering companies are public utilities – a technical finding that triggered a broad set of financial and legal protections for tens of thousands of renters in submetered apartments.
Republican lawmakers in the House and Senate voted roughly on party lines to send to Gov. Mike DeWine legislation to roll that decision back. The final roll call came around 11:30 p.m. Wednesday.
Submetered customers – those who pay bills to a middleman instead of a distribution utility – under the bill would lose some legal advantages held by traditional utility customers, like the ability to shop around for better energy prices or for low-income earners to enroll in payment assistance programs funded by utilities. And they could be stuck with a quasi-utility company that’s regularly accused of unfair billing practices.
For those reasons, Angela O’Brien, deputy director of the Ohio Consumers’ Counsel, the state’s legal advocacy for electric ratepayers, said the bill turns submetered renters into “second-class utility consumers.” And she has emphasized years of news stories about tenants facing alarmingly high utility bills from unregulated submetering companies.
Better Business Bureau pages for Nationwide Energy Partners and American Power and Light, another submeterer, are laden with charges of unfair billing or fees, most of which are denied by the companies. Over the past five years, state regulators have received 604 people complaints against the two companies combined, according to a spokesperson for the Public Utilities Commission of Ohio.
But industry players and Republicans say the Ohio Supreme Court’s ruling set up a confusing legal standard, where the Public Utilities Commission of Ohio is required to regulate submeterers but given no guidance as to which kinds of companies are included or what kind of rules to establish. For that reason, they say lawmakers needed to act.
Plus, they say the new legislation codifies several new legal protections for submetered customers that didn’t exist before the Supreme Court’s ruling.
“The last thing I want is a department making rules over an entire industry without any legislative direction,” said Rep. Dave Thomas, an Ashtabula Republican who sponsored House Bill 173, legislation that predated the court’s ruling, in an interview Thursday.
Industry spans at least 55,000 Ohioans
Starting around the 2000s, “submetering” companies began showing up at newly built apartment complexes. They struck deals with landlords, paying them tens of thousands of dollars per tenant to assume electric distribution operations behind the master meter. Industry operators buy electricity in bulk prices and resell it at the traditional rate, pocketing the difference.
The companies source electricity, deliver it to customers’ residences and bill them for it every month. This “exactly” matches the legal definition of the electric utilities the PUCO has regulated for more than 100 years, according to the Ohio Supreme Court.
But these submetered customers have lacked some legal protections other customers get like price controls, billing standards, payment assistance and the ability to shop among suppliers for better prices.
Nationwide Energy Partners has said it has about 34,000 electric customers. American Power and Light has about 21,000, per its legislative testimony.
Tenants and ratepayer advocates have long accused submetering companies of price gouging, a charge its advocates in Columbus have denied, along with other practices like charging tenants for electric use in common areas.
The PUCO has declined to investigate or intervene, saying the agency lacks jurisdiction.
House Bill 173 would unwind the classification of submeterers as public utilities. It would, however, establish protections for submetered customers. This would include ending the practice of the industry passing “common area” charges on to tenants; requiring they resell power at a 3% discount compared to the region’s standard service offer; and others.
Submetered customers lose protections
The legislation would move Ohio backward by creating a weaker, separate set of legal protections for submetered customers compared to traditional electric ones, said O’Brien, of the Ohio Consumers’ Counsel.
For instance:
- They couldn’t shop for their own electric supplier, who might provide a cheaper price than the utility’s default offer
- They’re ineligible for a utility-funded program that allows low income earners to pay a reduced bill every month, used by hundreds of thousands of Ohioans
“Utility consumers should not lose protections simply because they live in an apartment or condominium rather than a single-family home,” she said.
“A family living in an apartment or condominium should not receive fewer rights, fewer protections, and fewer choices than a family living across the street in a single-family home.”
American Electric Power, a major utility in central Ohio where the submetering industry is concentrated, has tussled with the industry for years. That includes fights at the PUCO and the successful appeal to the Ohio Supreme Court, demanding that the state recognize that submeterers are operating as unregulated electric utilities, even if under a different trade name.
Frank Strigari, a company lobbyist, told lawmakers that submeterers add no value and only extract money from an electric market that was working fine without them. A company spokesperson said Thursday that submetering harms Ohioans through higher electric bills.
“We are disappointed the bill passed,” the company said.
AES Ohio and Duke Energy, two other major investor-owned utilities here, opposed the bill, as well.
Sen. Bill DeMora, a Columbus Democrat, said the bill would have been a good idea before the Ohio Supreme Court’s decision. But now, he said, lawmakers are only rolling back protections that exist under the status quo and “screwing” customers.
He represents a district with a concentration of submetered apartments. He gets plenty of complaints from tenants, but no happy campers.
“I’ve never heard anyone who’s submetered say anything nice about submeterers,” he said.
Others, including the Ohio Environmental Council Action Fund, Legal Aid and AARP Ohio, all urged lawmakers to reject the bill as well.
Submeterers say they need legal clarity
Teresa Ringenbach, a lobbyist for Nationwide Energy Partners, a Columbus-based submetering company named in AEP’s lawsuit, testified in support of the bill.
Rather than settle the issue, the Supreme Court’s ruling called lawmakers to action because regulators lack the legal guidelines they need.
“The Court’s opinion removed that legislative anchor,” she said to lawmakers during committee testimony. “In more than 25 years practicing before the PUCO, I have never seen a situation where the Commission could operate with so little direction or oversight from the General Assembly.”
Rep. Thomas, the bill sponsor, said it’s true that submetered renters would lose their ability to shop around for power. While the landlord (technically the utility’s customer) could do so, Thomas conceded that he or she might not pass those savings on. This is “inherent” with the business model of submetering.
But that’s part of a compromise, he said. Customers lose access to some bill payment assistance programs, but it codifies eligibility for another while also guaranteeing other safeguards like disconnection protections into law.
Champion Real Estate, an investment, development, and management firm focused on multi-family housing, as well as the Ohio Manufactured Homes Association, both supported the legislation.