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Appellate Court Confirms BPU Decision Terminating Sub-metering Pilot Program


September 20, 2012
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For years, the New Jersey Board of Public Utilities (BPU) has maintained a policy against sub-metering — the practice of occupants in a multiple dwelling unit (MDU) building subdividing electric utility bills on the customer side of the meter.  Sub-metering is accomplished by installing private metering devices; the MDU property owner remains the customer of record with the utility provider.  In 2005, however, at the request of the New Jersey Housing and Mortgage Finance Agency (NJHMFA), the BPU was persuaded to explore a sub-metering pilot program.  The terms of that program were set out in a Memorandum of Understanding (MOU) dated December 6, 2005, by and between the BPU and NJHMFA.

In its Order approving the pilot program, the BPU nevertheless emphasized that it remained committed to its long-standing policy prohibiting sub-metering in MDU housing.

Thereafter, two MDU complex owners — Marine View Housing Company I (Marine View), in Hoboken, and Union Plaza Associates, L.P. (Union Plaza), in Union City, were approved by NJHMFA for participation in the sub-metering pilot program.  On that basis, Marine View spent $255,000.00 to install sub-metering equipment at its MDU complex, and Union Plaza spent $212,500.00 to install equipment at its property.

Upon notice of the program, opposition by the tenants was immediate, fueled by concerns over anticipated exorbitant utility charges.  Indeed, so great was the protest at Union Plaza, along with legal action by its tenants, that the project was never implemented.

Several meetings were held in 2009 among the parties and on October 28, 2009, the BPU issued an Order directing that NJHMFA, Marine View and Union Plaza show cause why the sub-metering pilot program should not be suspended.  Following the submission of comments, the BPU issued a formal Order on December 10, 2009, suspending the sub-metering pilot program.

Marine View and Union Plaza subsequently appealed to the Appellate Division of the Superior Court of New Jersey.  They argued that the BPU decision to terminate the pilot program was unfair, capricious and unreasonable.  They also asserted that it was not based upon competent evidence and that it deprived them of their property without due process of law.  They noted that they had spent hundreds of thousands of dollars retrofitting their properties so as to be able to participate in the sub-metering pilot program, “with the reasonable expectation that it would receive a fair and impartial evaluation.”  Instead, they claimed, the program was terminated “after [the BPU] succumbed to political pressure exerted by local politicians and tenants’ advocacy groups.”

The Appellate Court rejected these arguments and dismissed the appeal for failure to present a justiciable issue.  It noted that the MOU expressly stated that the sub-metering pilot program was a “pilot, experimental undertaking … with no assurance of continuance.”  As a result, the Court held, “Appellants were clearly on notice that any funds used to retrofit their properties to accommodate the sub-metering pilot program were spent at the risk that the program would not be approved by the BPU for continuation. … Appellants understood and assumed the risks involved in this pilot program.”