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 statutory rules 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 to new installations, 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.

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 appears to have 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 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 submetering to be eliminated from newly constructed multi-unit residential facilities.

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 means a customer whose multi-unit residential building for which service is sought was constructed after the date the tariff was closed.⁴ 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.

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. Thus, it would appear that these buildings are functionally very similar to pre-existing multi-unit residential facilities and should also be eligible to convert from their prior tariff to the existing Master Meter/Submeter Tariff.

Not only does this approach appear most consistent with the historical decisions about submetering, but it 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 a rate not to exceed the 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.

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 these complaints were entirely or primarily related to mobile home parks, 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 last 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 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 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.)

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 there are no state adopted model guidelines that we are aware of for the location and testing of natural gas submeters, like there are 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.