Consumer Protections for Reselling of Public Utility Services

Before
The Ohio House of Representatives
Finance and Appropriations Committee

Testimony on House Bill 483 (Omnibus Amendment)
(Consumer Protections on Master-Metering, Submetering and
Reselling of Public Utility Services)

By
Bruce Weston
Ohio Consumers’ Counsel
Office of the Ohio Consumers’ Counsel

April 8, 2014

Good morning Chairman Amstutz, Vice Chairman Boose, Ranking Member Sykes, and members of the House Finance and Appropriations Committee. I am Bruce Weston, the Ohio Consumers’ Counsel. Our agency is the advocate for Ohioans regarding their residential electric, natural gas, telephone, and water services. I appreciate the opportunity today to recommend protections for Ohio consumers regarding the master-metering, submetering and reselling of public utility services. (See Amendment HC0448X2)

In many apartments, manufactured homes and other housing communities, the public utilities do not directly meter and bill individual residents for the utility services that they use. Instead, the utility services are provided through a master meter that registers aggregate usage for entire buildings or properties. A landlord, park operator, condominium owners association or other third party then “resells” the service of the public utility (or other provider) to tenants and residents.

The resale of utility service often results in higher bills than what customers would pay if they were billed directly by the utility (or other provider). This problem was highlighted last fall in newspaper stories (that are attached to my testimony). It was reported in those news articles that reselling has inflated customers’ utility bills through added fees and charges by as much as 40 percent in some cases.

This amendment (HC0448X2) is a step in the right direction for improving the current lack of consumer protection on this issue. I thank Representative Duffey for reaching out to OCC to ask for our additional recommendations for consumer protection. Therefore, I respectfully ask the Committee today to make additional amendments, beyond those in the Omnibus Amendment, to include more protections for Ohioans who purchase resold utility services. I also note my appreciation for Representatives Foley and Blair, among others, for their sponsorship of House Bill 422 to protect consumers who purchase resold utility services. My general list for amending the Omnibus Amendment to House Bill 483 is as follows in this area for consumer protection (subject to additional details I may have for these issues).

First, please address the circumstance of customers who purchase resold water and sewer services. The monthly bills of Ohioans who purchase resold water and sewer customers should be added for protection in this Bill. For water and sewer customers of resold services, customers should pay no more than the rates of the water and sewer provider in their area, whether that is a public utility or a non-utility provider.

Second, Section 4934.03 (Lines 60-65) appears to be an exception to consumer protections, that could allow resellers to charge consumers more than the public utility’s charges. We do not support inclusion of this section as written.

Third, please prevent allowing a public utility service “reseller” to enter into a rental agreement with consumers, per Section 4934.06, that circumvents the protections provided in Section 4934.05. (Amendment HC0448X2, Lines 66-80) Thus, Section 4934.06 (Lines 81-94) should be eliminated from the Bill.

Fourth, please use a definition for resellers that provides for comprehensive consumer protection for resold service transactions, regardless of the entity involved in the reselling. We therefore recommend clarification and uniformity regarding the term third-party resellers appearing in Amendment HC0448X2, lines 176-187. Third-party resellers, along with landlords, park operators and condominium owners associations, should be consolidated into one term (“third-party resellers”) in Section 4934.01. (Lines 10-50) Section 4934.19 (Lines 176-187) should then be eliminated. This new definition should then be used throughout Chapter 4934.

Fifth, the resale of natural gas service should be limited by the Standard Choice Offer or Gas Cost Recovery rate in the same manner that the resale of electric service is limited by the Standard Service Offer in Section 4934.05. (Amendment HC0448X2, Lines 66-80) With regard to all other electric and natural gas services and rates, customers of resold services should pay no more than the rates of the applicable public utility serving the consumers’ area.

Sixth, the public utility service used in so-called “common areas” and “common usage equipment” should also be billed at a rate no higher than the caps on rates in other parts of the Bill (Section 4934.05). What is currently written for common areas in Section 4934.09 (Amendment HC0448X2, Lines 105-114) could become a loophole for overcharging customers. The loophole should be closed.

Seventh, it should be stated that this Bill does not limit the authority of the Public Utilities Commission to prohibit or limit the reselling of utility services. For example, there are tariffs in effect for natural gas utilities that do not permit the reselling of natural gas service.

Finally, this Bill needs an enforcement mechanism that would allow customers to seek damages, reparations and injunctive relief from those who violate this chapter. Please incorporate the enforcement mechanism from lines 98 to 111 of House Bill 422. I should add that I recommend addressing utility issues in stand-alone bills and not in budget bills, as you may recall in my testimony last week on utility charges to customers for former manufactured gas plants. But I do appreciate your efforts to protect consumers. I look forward to working with Members of this Committee and with other Members in the House to protect consumers on these issues. Thank you.