Consumer Protections Down the Drain: Stopping the leaks in Ohio Law and the PUCO's Jurisdiction Concerning Submetering Companies

• Author: Kari D. Hehmeyer
• Position: Kari D. Hehmeyer, J.D., summa cum laude, Capital University Law School; B.S.B.A. in Marketing, Fisher College of Business, The Ohio State University. I would like to thank my husband, Kevin, for his patience and support throughout this endeavor, and continuous encouragement to see the light at the end of the tunnel. I would also like to thank ...
• Pages: 723-765

CONSUMER PROTECTIONS DOWN THE DRAIN:

STOPPING THE LEAKS IN OHIO LAW AND THE PUCO’S

JURISDICTION CONCERNING SUBMETERING

COMPANIES

KARI D. HEHMEYER*

I. INTRODUCTION

In 2013, the Columbus Dispatch published a three-part investigative

series discussing the utility markups that unregulated, third-party

submetering companies charge utility customers.1 The ten-month

investigation revealed markups ranging from five percent to forty percent

due to landlords entering into contracts with submetering companies rather

than having the public utilities provide direct service to customers.2 The

investigation revealed that because the submetering companies are

unregulated, they can and have resorted to collection tactics, shutting off

utilities, and even eviction—all tactics that are illegal for regulated utility

companies.3

In a one-year time span, the Better Business Bureau of Central Ohio

received 5,137 complaints and questions about submetering companies and

their practices.4 The most common complaints revolved around high costs

Copyright © 2017, Kari D. Hehmeyer.

* Kari D. Hehmeyer, J.D., summa cum laude, Capital University Law School; B.S.B.A.

in Marketing, Fisher College of Business, The Ohio State University. I would like to thank

my husband, Kevin, for his patience and support throughout this endeavor, and continuous

encouragement to see the light at the end of the tunnel. I would also like to thank Professor

Mark R. Brown, for his willingness to undertake this unfamiliar topic with me, and provide

his assistance throughout the writing process. Finally, I would like to thank my parents,

Jeff and Kyle Ann Hoyda, for truly exuding passion in their chosen life work, leading me to

seek passion in my own life work, and leading me to the law. For their constant support

and love, I am forever grateful.

1 Dan Gearino, Shocking Cost Investigation: Utility Middle Men Charge Renters

Inflated Prices, COLUMBUS DISPATCH (Oct. 20, 2013, 12:58 PM) [hereinafter Shocking Cost

Investigation I], http://www.dispatch.com/content/stories/business/2013/10/20/shocking-

cost.html [https://perma.cc/ANQ6-NVPA].

2 Id.

3 Id.

4 Id. The one-year time frame ranged from October 2012 to October 2013 and the

number of inquiries was up thirty-three percent from the year before. Id.

724 CAPITAL UNIVERSITY LAW REVIEW [45:723

and unhelpful customer service, while some customers—in an attempt to

avoid eviction—were forced to move from their residences due to the

inability to budget for the high bills.5 Several of the customers interviewed

during the Dispatch’s investigation requested to remain anonymous in fear

of retaliation from the submetering companies for speaking out about the

growing issue.6 This fear of retaliation and the “threat of eviction makes

consumers less likely to fight utility charges that they see as excessive.”7

But, even for those who did speak out, their complaints were met with a

stern, unhelpful response.8 While that response may not be the reply

consumers were hoping for, it currently is the only option when living in

an area controlled by utility submetering companies.9

The Dispatch investigation shed light on an industry booming

throughout central Ohio that is severely lacking any regulatory control—

unbeknownst to many—and affecting an estimated 18,000 to 20,000

housing units in the Columbus area alone with the potential to affect three

million Ohioans.10 Ohio Attorney General Mike DeWine acknowledged

the existence of the issue, but noted that resolution of the problem would

require action on the part of the Ohio legislature.11 Although having the

legislature pass a law to regulate the practices of submetering companies

seems logical, it has been an arduous and daunting task that has yet to

prove fruitful.12 Even though this practice is against public policy

decisions previously made in Ohio, there are currently no state agencies

5 See Dan Gearino, Shocking Cost Investigation: Pay Electricity Bills or Face Eviction,

COLUMBUS DISPATCH (Oct. 21, 2013, 4:58 PM) [hereinafter Shocking Cost Investigation II],

http://www.dispatch.com/content/stories/business/2013/10/21/pay-electricity-bills-or-face-

eviction.html [https://perma.cc/B2ZM-2XPY]. Simone Stevens, age 26, moved out of her

apartment in 2013 after receiving an eviction notice from American Power & Light, a

submetering company. Id. She eventually agreed in court to move out of her apartment to

avoid the eviction. Id.

6 See id.

7 Id.

8 See Shocking Cost Investigation I, supra note 1. For example, one customer reported:

“They pretty much told me that I don’t have a choice and this is how it is.” Id.

9 See id. (discussing that when buildings are served by a submetering company, “the

submeter[ing] company is the only option.”).

10 Id.

11 Id.

12 See infra Part IV.

2017] CONSUMER PROTECTIONS DOWN THE DRAIN 725

with authority to respond.13 Several claims have been heard before the

Public Utilities Commission of Ohio (PUCO) over the past two decades,

yet no changes have been made to the regulation framework.14

With no oversight or regulations in place, submetering companies are

free to engage in practices that are illegal for regulated public utilities, and

end-use customers suffer the consequences.15 The end-use customers are

precluded from participating in competitive utility choice programs that

provide the opportunity to shop for competitive generation supply.16 These

customers are also offered absolutely no protection against high-rate utility

charges, disconnection of services, or threats of eviction.17 And finally,

they have no remedy available to combat the submetering policies as the

court systems have shied away from addressing the submetering issue.18

Submetering utility companies in Ohio exhibit the characteristics and

are engaged in the type of business necessary to be considered public

utility companies. These companies should therefore be subject to the

same regulations as regulated public utilities companies under the PUCO.

This would mitigate their ability to charge unusually high distribution rates

with no legal repercussions, evict tenants for non-payment, and prevent

consumers from exercising their right to shop for competitive electric

services.

II. BACKGROUND

A. “Public Utility” Status in Ohio

Ohio law defines a “public utility” under Section 4905.02 of the

Revised Code.19 Companies are considered public utilities and subject to

the PUCO when companies engage in the various types of businesses

13 Shocking Cost Investigation I, supra note 1. Attorney General DeWine stated, “We

made a public-policy decision years ago in this state that we were going to put in place

certain protections for the individual utility consumer. It seems to be a problem when you

have a small minority of consumers who do not have those protections.” Id.

14 See infra Sections III.B, III.C.

15 See infra Parts IV, V.

16 See infra Section V.A.

17 See infra Section V.D.

18 See infra Part III.

19 OHIO REV. CODE ANN. § 4905.02(A) (West 2016) (“As used in this chapter, ‘public

utility’ includes every corporation, company, copartnership, person, or association, the

lessees, trustees, or receivers of the foregoing, defined in section 4905.03 of the Revised

Code, including any public utility that operates its utility not for profit . . . .”).