A bipartisan duo of lawmakers wants to stomp out an industry of middlemen in the utility supply chain that has been accused of adding what they called “exorbitant” costs to renters’ water and electric bills while depriving them of basic consumer protections guaranteed to all traditional utility customers.
Reps. Tex Fischer, a Mahoning County Republican, and Sean Brennan, a Cuyahoga County Democrat, held a press conference Tuesday to roll out a simple idea: regulate “submetering” companies like public utilities.
The submetering industry works by striking deals with owners of multifamily housing units, often newer or luxury apartment buildings. Utility companies still source and distribute water and energy to a complex through “master meters.” But submeterers determine how much electric or water any given apartment uses and bills accordingly.
However, tenants have said in media interviews, in complaints to the Public Utilities Commission of Ohio, and in scores of angry reviews online that they’re regularly hit with unreasonable water and electric costs from submeterers. Those can include electric costs from common areas like hallways and lobbies.
What does the PUCO say about submeterers?
The PUCO has determined that the middlemen, or submeterers, are not legally considered to be public utilities like FirstEnergy, Duke Energy or American Electric Power. This distinction means customers aren’t entitled to certain consumer protections in state law against water or electric service disconnection, regulatory oversight of utility costs, the ability to shop for their own source of cheaper or cleaner electricity, or a state subsidy toward their bill for low-income earners.
“These residents have no say in their energy provider, but more than that, they’re forced to purchase energy from entities that are not regulated the same way other providers [utilities] are,” Fischer said.
Brennan said submetered customers have effectively become “second class citizens,” having lost the legal protections given to traditional utility customers, due to an opaque transaction between landlord and the submeterer.
“Ohio law holds our public utilities to high standards,” he said. “Submetering companies aren’t bound by any of these same obligations, even though the service they provide is identical from the customer’s point of view.”
One big utility company backs crackdown on submeterers
Two powerful players backed the legislation Tuesday: Ohio Consumers’ Counsel Maureen Willis, who leads the state agency that represents residential electric customers in PUCO cases, spoke in support of the plan.
Frank Strigari, a lobbyist for American Electric Power, appeared with the sponsors at a media event. AEP, for its part, has been challenging Nationwide Energy Partners at the Ohio Supreme Court, arguing the submeterer is acting indistinguishably from a public utility, minus the consumer protections AEP owes its customers. Oral arguments in the matter are scheduled for next month.
There’s no official count of how many Ohioans live in submetered units. The industry took off in central Ohio in the 2000s and has since popped up in units as far apart as the Cleveland area and Cincinnati.
At least two companies have scaled the submetering industry in central Ohio: Nationwide Energy Partners and American Power and Light. Both companies are alike in that their names mimic those of well known local providers (i.e. Nationwide Insurance, AEP, and Dayton Power & Light Co.) and in that they share personnel with some of the companies that own the apartments that enter deals with submeterers. For instance, Michael DeAscentis II serves as both the CEO of Lifestyle Communities, a Central Ohio developer, and CEO of Nationwide Energy Partners. American Power & Light was founded by Donald Kenney, according to the Better Business Bureau, and Kenney’s son now runs Preferred Living, another property manager around the city.
Nationwide Energy Partners declined an interview request with DeAscentis. Teresa Ringenbach, a company lobbyist, said in an email that the PUCO already has in place consumer protections that cap customers’ bills and require landlords to follow the disconnection rules as utilities. This exists via a PUCO order as opposed to the certainty and permanence of state law.
She said that Nationwide serves 34,000 units across 168 “communities” in Ohio for electricity and 33,000 units over 171 communities for water. In the past, the company has denied allegations that it charges electric rates beyond those of AEP – the company says its business model relies on buying power in bulk pricing and selling it to customers at standard rates, pocketing the difference.
American Power & Light didn’t respond to an inquiry.
Complaints against the two major submeterers are widespread
As Brennan and Fischer noted, the companies’ Google reviews are rife with claims of unfair and overly expensive electric bills. The companies’ Better Business Bureau pages received 57 complaints against NEP in the last three years, and 22 against American Power & Light. And while the PUCO has received dozens of complaints against both, the agency has declined to act given its finding that the companies are not public utilities and therefore outside the PUCO’s reach.
Different attempts to rein in the industry over the years have failed. Mark Whitt, a Columbus attorney, sued Nationwide Energy Partners after he noticed unusually high electric bills at his condominium in 2015. He has litigated against the company continuously since then, both in his individual capacity and in an attempted class action lawsuit under Ohio’s consumer protection laws. He hasn’t succeeded, but he said in an interview Tuesday the proposed legislation is a positive development.
One of his lawsuits ended with an Ohio Supreme Court opinion essentially saying what to do about submeters is a question that ought to be settled by lawmakers and not judges.
Others in the Statehouse have pulled in an opposite direction. Sen. Andrew Brenner – a Powell Republican who works in real estate as a lender, agent and investor – has introduced legislation in the past that would change Ohio law to expressly say that submeterers are not utilities and therefore can’t be regulated by the PUCO.
Brenner didn’t respond to an interview request.
The Ohio Home Builders Association supported the legislation, which didn’t pass, with lobbyist Vince Squillace testifying it would ensure that “energy service providers” would have the ability to operate “without the threat of being litigated out of business through a regulatory process.”
Fischer and Brennan’s legislation hasn’t yet been formally introduced. It would need approval from the House, Senate and governor to become law.
