Discussion

There is an existing stock of residential buildings that receive master meter service that are not submetered. Based on data submitted in response to the ALJ Ruling, there are approximately 32,000 master meter electric customers, made up of approximately 156,000 living units. There are approximately 118,000 master meter gas customers, made up of approximately 1,498,000 living units. These figures appear to include mobile home parks, which are governed by other tariff provisions and would not be affected by the Petition. This stock of current Master Meter Tariff customers would be one of the primary beneficiaries of the petition. According to petitioner, some utilities have defined "new installation" as any customer not served under the Master Meter/Submeter Tariff at time of closure. Other utilities define "new installation" as a building constructed after the time the tariff was closed. Thus, it appears that some utilities have allowed Master Meter Tariff customers whose buildings existed prior to December 1981 to switch to Master Meter/Submeter Tariff service, while some have strictly interpreted "new installation" to preclude that switch.

The other potential beneficiary described by the petition is buildings of any vintage that were not originally constructed for residential purposes that have since been converted to residential usage. The utilities did not provide estimates of the number of buildings that were not originally constructed for residential use that have since been converted to residential usage. According to the petitioner, some utilities have allowed these converted customers to take service under the Master Meter/Submeter Tariff, but other utilities have retained the customer on its original commercial tariff.

This lack of consistent treatment is troubling, especially when overlaid on the context within which the tariffs were closed to new installations. For example, D.88651 found that:

"Metering or submetering of individual residential units of multi-unit complexes encourages conservation of energy. All new construction of such type should be required to be individually metered where gas service is to be used directly by each individual unit. A sufficient period should be provided before such a requirement becomes effective to enable owners and builders to revise building plans to provide for individual metering or submetering of gas and electric service. ..." (FOF 10, emphasis added.)

In addition, OP 5 required "All respondent electric and gas utilities shall immediately initiate an extensive program or expand upon existing programs to encourage the separate metering of units in existing multi-unit residential facilities now served only through a master meter. ..." (Emphasis added.) However, Ordering Paragraph (OP) 3 requires "Each respondent electric utility shall within ten days of the effective date of this order file necessary revisions to its rules and regulations to provide for separate metering by the utility for electric service to each unit in new multi-unit residential facilities, except when a commitment for other than separate metering of electric service for each residential unit is required." (Emphasis added.) Nowhere does D.88651 address that separate metering by the utility is preferable in existing master meter multi-unit residential facilities.

There is some imprecision in the language used in D.88651. OP 3 requires "separate metering by the utility" for new construction, whereas OP 5 requires only "separate metering" for existing multi-unit residential buildings, and Finding of Fact (FOF) 10 refers to "individual metering or submetering." FOF 10 clearly distinguishes between individual metering and submetering. It is not clear whether "separate metering", without reference to the utility, could include both "individual metering and submetering" or was intended to mean only "separate metering by the utility."

Following adoption of D.88651 in 1978, most utilities closed their Master Meter Tariffs, a logical outcome of the directive that multi-unit residential new construction be separately metered by the utility. Because of this directive, all new construction was to be individually metered by the utility, eliminating the need for the Master Meter Tariff, except for those customers already served under the Master Meter Tariff. D.90062 modified D.88651 to also provide for submetering or utility metering in new multi-unit residential facilities.

It was not until December 1981, following issuance of D.93586, that the utilities closed their Master Meter/Submeter Tariffs to new installations. Nothing in D.93586 required closing these tariffs to pre-existing multi-unit residential buildings. In fact OPs 2 and 3 requiring separate utility metering are explicitly limited to new multi-unit residential structures. However, in filing tariffs, many utilities utilized the term "new installations" rather than new construction and it appears that at least some utilities have interpreted new installations to not just include new construction, but also to encompass pre-existing multi-unit residential facilities.

If a new installation is defined as any customer who was not previously served on the tariff then no customer, whether or not their building existed before the tariff was closed, could be added to the tariff. On the other hand, if new installation is defined as a customer whose building was constructed after the tariff was closed, then owners of buildings that were constructed prior to the 1981 tariff closure would still be eligible to enroll in the Master Meter/Submeter Tariff. Based on a review of the language of the decisions at issue, it is our belief that the Commission understood the difficulty of converting an existing building to separate utility metering and only intended for master metering submetering to be eliminated in multi-unit residential facilities constructed after 1981.

We are faced here with the need to clarification of a tariff where the same words appear to have been interpreted differently by different utilities. Nothing in a current rule, tariff or decision needs to change, rather how the utilities interpret the same words must be reconciled.

It appears that the simplest way to resolve these issues for buildings originally constructed for a residential purpose is to make no change to any decision or tariff, but simply state that for purposes of the utilities' Master Meter/Submetering Tariffs, new installation should be interpreted to mean a customer whose multi-unit residential building for which service is sought was constructed after the date the tariff was closed. A customer whose building was constructed prior to the date the Master Meter/Submeter tariff was closed and was served as a master meter customer would be eligible to convert from its Master Meter Tariff to the Master Meter/Submeter tariff.

The one exception to the need to modify tariffs is for Pacific Gas and Electric Company (PG&E) who modified its tariffs, effective May 18, 2004, to explicitly prohibit additional submeters to an existing master metered location. Advice Letter (AL) 2533-G/2491-E was approved without resolution and by this decision we rescind that modification and direct PG&E to file an Advice Letter to remove the language added to Schedule ES, ESL, GS, and GSL by AL 2533-G/2491-E. The fact that PG&E added language to its tariffs in 2004 to prohibit submeters being added to existing master metered locations confirms that the term "new installation" was subject to interpretation consistent with the meaning of new installation described herein. SCE identifies D.88-09-025 as the decision which supports its interpretation that to be served on the Master Meter/Submeter Tariff, the multifamily accommodation "must have had submeters installed prior to December 7, 1981." (D.88-09-025, Cal. PUC LEXIS 609* 18.) SCE is correct that the dicta of D.88-09-025 reads as SCE says.

Finding of Fact 11 of the same decision says "D.93586 closed the [Master Meter/Submetering] rate schedules to new installations in December 1981 and singled out mobile home parks as the only type of multifamily service that should have the option of installing electric submetered service to tenants." (Emphasis added.) When we look to the language of D.93586 though, it clearly states, in OPs 4 and 5, that the special allowance for submetering by mobile home parks was with respect to NEW residential mobile home parks. No modification was made to the language of D.88651 with respect to existing multi-unit residential structures. D.88651 clearly did not close the Master Meter/Submetering Tariffs (as those remained open without restrictions until three years later) and in fact D.88651, in FOF 11, makes clear that the utilities should have been providing "detailed information concerning the advantages of individual metering or submetering so that owners and landlords are encouraged to voluntarily install such metering..." (emphasis added). Therefore, although D.88-09-025 does include in dicta the language SCE claims, a review of the historical decisions relied upon by D.88-09-025 undermines SCE's claim that the Commission intended to close the Master Meter/Submetering Tariff to existing Master Meter customers.

Although we do not believe that any tariff change is required to allow for the clarification we make today to the term new installation, the utilities may file revised tariffs to formalize this interpretation if they so desire.

For buildings that were originally constructed for a non-residential purpose that have since converted to residential use, we have less clear guidance from the historical documents. However, it is clear that if a building was originally constructed for a non-residential purpose, the requirements for individual metering of living units would not have been applicable to the building when it was constructed. In its comments on the Draft Decision, SDG&E points out that the language of § 780.5 provides that the Commission "shall require every residential unit in an apartment house or similar multi-unit residential structure,...for which a building permit has been obtained on or after July 1, 1982...to be individually metered for electrical and gas service...." SDG&E argues that any buildings originally constructed for a non-residential purpose that we have converted to residential use must have converted to residential use and have been served as a Master Meter customer prior to December 1981 to be served under the Master Meter/Submeter Tariff or the building will violate § 780.5.

The statute uses the term "individually metered" but does not specify whether that individual metering must be by the utility. D.93586, on the other hand, specifies that new multi-unit residential structures require separate metering by the utility. It is clear that any NEW multi-unit residential building for which a building permit was obtained on or after July 1, 1982, must have been separately metered by the utility for it to be consistent with both § 780.5 and D.93586. However, D.93586 does not address converted buildings, and the statute does not define whether individually metered means by the utility or through submetering. As described above, a review of the language in D.88651 is imprecise. Taken together, it makes sense to interpret § 780.5 in light of D.93586, and clarify that any building converted to a residential use, for which a building permit was obtained on or after July 1, 1982, must be separately metered by the utility.⁴ That leaves a smaller set of converted buildings that might be eligible to convert from their prior tariff to the Master Meter/Submeter Tariff, those who converted without the need for a building permit or those conversions that occurred before December 1981 when the Master Meter/Submeter Tariff was closed to new installations, but who did not pursue submetering at that time. Clearly such converted buildings must also abide by the requirements of § 739.5.

This approach to allowing customers to convert to the Master Meter/Submeter Tariff appears most consistent with the historical decisions about submetering, and furthers our policy objectives more effectively than not allowing multi-unit residential facilities to convert to the existing Master Meter/Submeter Tariff. We are not persuaded by the arguments of PG&E and SCE that allowing submetering is somehow detrimental to a customer's ability to better manage its energy usage. PG&E's response stated "Allowing the submetering of existing buildings diminishes the utility's ability to provide individuals with direct price signals, because submetered customers are not provided rate and metering options similar to those of the utility." (PG&E September 23, 2004 Response.) PG&E argues that individual metering by the utility provides a better signal than submetering. While individual metering is certainly preferred in new construction, PG&E's response downplays the fact that tenants of a Master Meter Tariff customer receive no price signals because master meter customers are prohibited from separately charging energy costs but instead must bundle those costs in rent charges under PG&E's Tariff Rule 18. In addition, § 739.5 requires that when submetering is provided by a master meter customer, the master meter customer is obligated to provide service to its tenants at the same rate otherwise offered by the utility were the utility providing service to the tenant. In essence, PG&E compares submetering to individual metering by a utility in stating its preference against submetering when the more accurate comparison is between no price signal (in an existing master meter situation) and submetering. It is our conclusion that tenants of multi-unit residential buildings who are not submetered have substantially less ability to manage their energy usage than those who are submetered, and therefore submetering would be preferred to send accurate price signals.

SCE and TURN also argue that if a customer is submetered, the building owner will lose incentive to install energy efficient appliances because such improvements will benefit the submetered tenant not the building operator. However, this incentive is no different for submetered buildings and for buildings that are separately metered by the utility, yet both TURN and SCE advocate separate metering by the utility.

Another reason that several parties give for why existing master meter customers should not be allowed to offer submetering is the level of complaints that they anticipate will arise with additional submetering. They also raise jurisdictional concerns about the Commission's ability to effectively resolve complaints about submetered bills. Based on data submitted in response to the ALJ Ruling, there are approximately 2,700 master meter/submeter electric customers, made up of approximately 162,000 living units. Based on the same data, there are approximately 2,300 master meter/submeter gas customers, made up of approximately 178,000 living units.⁵

The Commission's Consumer Affairs Branch provided the ALJ with statistics regarding submetered billing complaints it handled between January 2001 and January 2004, which indicated that there were 81 complaints about submetered bills received that were attributable to customers in either PG&E, San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE) or Southern California Gas Company (SoCalGas) service territories over that time period. It is possible that some of these complaints were related to mobile home parks rather than multi-unit residential structures, but the data does not allow us to determine that with certainty.

Even assuming that all of the billing complaints were related to submetered multi-unit residential facilities other than mobile home parks, 81 complaints over a three year period for 340,000 living units is not particularly high. This rate averages to 27 complaints per year. Based on the utility data on the electric side, the maximum number of additional living units that could be submetered is approximately 155,000, which proportionately means that we would expect an additional 12 complaints per year if the statistics over the 2001-2004 time period holds true. Based on the utility data on the gas side, the maximum number of additional living units that could be submetered is approximately 1,498,000, which proportionately means that we would expect an additional 119 complaints per year if the statistics over the 2001-2004 time period hold true. These projections assume that every Master Meter Tariff customer chooses to submeter its tenants, which at least near term is a fairly unlikely proposition. Therefore, although we agree that additional complaints might occur when tenants who have never been exposed to energy price signals first receive submeters and receive an energy bill, we do not find that this prospect imposes such a burden on the Commission, the utilities, and other entities to forgo the benefits of having customers receive energy price signals. In addition, revisions to § 739.5 made during the last legislative session provide clear authority for the Commission to accept and respond to complaints under § 739.5 and continues the requirement that Master Meter/Submeter customers be alerted to their responsibilities under § 739.5 by the utilities.

The California Department of Food and Agriculture, Division of Measurement Standards (Division of Measurement Standards) points out that it and local county weights and measures offices are responsible for regulating measuring devices, including submeters, by testing for accuracy, evaluating suitability of devices for installation and use, and reviewing billing, pricing, and metering complaints. The figures described above do not reflect complaints received by other entities than the Commission. The Division of Measurement Standards is concerned that with the installation of additional submeters, state and local governments responsible for these regulations would be unable to shoulder the financial costs of the additional workload required to effectively regulate additional submeters. The need for access to evaluate and test submeters by state and local county weights and measures offices, and the need for submetering installations to adhere to safety and local building codes and ordinances means that submeters cannot just be placed anywhere in a building. For example, Southwest Gas Corporation (Southwest Gas) points out that "(u)nder federal pipeline safety standards and local building codes and ordinances, natural gas metering equipment must be installed with adequate positive ventilation" eliminating interior closets or utility rooms as possible locations for submeters. (Southwest Gas Corporation Response, October 27, 2004, p. 2.)

Both The Utility Reform Network (TURN) and Hunt Power attached the electric submetering guidelines adopted by the Texas Public Utility Commission for apartments, condominiums, and mobile home parks. Section 25.142(e) of the Texas Rules Applicable to Electric Service Providers provides common sense requirements for submeter location and testing that should be followed by building owners and managers that pursue new electric submetering as a result of this decision. (The complete text of the guidelines is available online at http://www.puc.state.tx.us/rules/subrules/electric/25.142/25.142.pdf.) In addition, Section 8.4 of PG&E's "greenbook" ( http://www.pge.com/docs/pdfs/customer service/new construction services/greenbook/service requirements/08.pdf) provides useful guidance for locating meters at residential buildings that should be followed to the extent possible in new submetering locations.

It is clear that the current impetus to submeter is stronger for electric service nationally than is submetering for natural gas. In part, this is because of the safety concerns identified by Southwest Gas. In addition, more emphasis has been placed recently on concerns about peak electricity demand and customer ability to reduce peak usage than has been directed at natural gas usage. Nevertheless, since building managers who choose to install submeters would need to follow the relevant federal pipeline safety standards and local building codes and ordinances, just like any other entity that works with natural gas facilities, we do not see that the safety concerns necessarily present any additional impediment to installation of submeters than any other work with natural gas facilities would. Therefore, even though no other states have adopted model guidelines that we are aware of for the location and testing of natural gas submeters, like they have for electric submeters, the existing building codes, ordinances, and federal standards establish reasonable limitations on the location of natural gas submeters that must be followed.

More troubling to us from a public interest standpoint is the prospect of multi-unit residential building owners retaining their existing rents, which include an allocation to cover energy costs, and then incrementally charging tenants for energy usage based on submetering the energy usage. In fact, this situation is prohibited under § 739.5 because it would allow the Master Meter/Submeter customer to charge tenants more than the utility would for energy. Therefore, to the extent that an existing Master Meter customer converts to the Master Meter/Submeter tariff, that customer should concurrently revise its rent downward to remove energy related charges. For those customers who make this conversion that are subject to the jurisdiction of local rent control boards, they should move promptly to submit revised rent charges for approval to the relevant authorities that reflect the removal of energy costs, consistent with § 739.5.

The Association concurs wit the Draft Decision's finding with respect to removal of the energy allocation from rent in a rent control situation, but both the Association and Hunt Power take issue with that requirement for market based rents. However, to the extent that any lease includes the provision of utilities as part of the rental agreement, once a landlord begins to charge separately for energy services as a result of submetering its tenants, it must remove from the rent due to an allocation for energy costs. This requirement does not limit a landlord's ability to establish an appropriate market rate for rent, upon termination of the existing lease.

To ensure that tenants know of this requirement, we require the utility to notify any Master Meter customer that applies to convert to the Master Meter/Submeter Tariff that the customer, in addition to posting the relevant utility tariffed rates, consistent with § 739.5(e), post a notice that any tenant whose lease includes utilities is entitled to removal of energy costs upon receipt of a submetered bill from the Master Meter/Submeter customer.