New dual-fuel penalties being considered

Real Estate Weekly, Nov 30, 1994 by Lois Weiss

Pushed by an administrative judge's decision against its current penalty practices, Con Edison is trying to change the way it calculates penalties for dual-fuel customers. Under the proposal, smaller penalties will be assessed based on actual usage, but can be incurred more often. Those using pilot lights will pay firm gas rates to run them and will not be penalized. Additionally, Con Ed will not forgive penalties for using gas because of malfunctioning equipment.

About 780 customers will be affected, including hospitals, universities (including Columbia University), and the City of New York, along with many co-ops and other buildings around the city and in Westchester. According to one report, the city paid $415,000 in penalties last year.

"Dual-fuel" gas customers enjoy more favorable rates than "firm" customers, but much switch to oil during very cold weather when the demand for gas is greater and supplies are tight.

Under current rules, a dual-fuel customer is supposed to be penalized at twice the monthly charge for remaining on gas when they are not supposed to. So if the monthly cost is $39,000, the penalty would be $39,000 - even for a day of gas use - and the total monthly cost would be $78,000.

In practicality, when a customer notifies its Con Edison borough office that they are experiencing difficulty with a burner or the switchover equipment is malfunctioning, they are not usually assessed penalties.

Explained Gerald Pindus, president of TedPin Realty, who owns several buildings as well as U.S. Energy Controls that provides monitoring equipment for heating systems, "The way its been treated in the past, is that if the burner broke down, you would call up Con Ed and say you have to use gas, and they won't give you a fine. Now they can electronically tell that you are using gas and they can catch you right away."

Con Edison recently disclosed that with its new metering and communication equipment in place, a representative does not have to make an on-site visit to determine when gas is being used. This will also help eliminate the "no access" penalties.

According to Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), an owner's group, Con Edison workers would in the past make an on-site visit to ensure the burner had switched over. If the worker could not gain access to the boiler room, "even if the super just went for lunch," the customer would get hit with a penalty, even if the burner, in fact, had switched over properly.

"They would penalize you if they found the seal broken on the thermostatic control," said Margulies. "A variety of members have had to fight them with varying success."

Last year, because the weather was so severe and curtailment periods were often and long, many dual fuel customers were hit with penalties. They have complained bitterly, filing more than 70 complaints with the Public Service Commission (PSC), that according to one estimate will take "years" to resolve.

In one of the first rulings decided in the last few weeks, the administrative judge had suggested a penalty of four times the actual usage, rather than two times the entire monthly bill.

The owner, along with the Owners Committee on Electric Rates, had argued for a two times the actual usage penalty, said Joel R. Dichter, the group, s associate general counsel and a partner in the law firm of Klein Zelman et al & Dichter.

Con Ed, however, insisted on a penalty of ten times the customer's average daily cost for using a small amount of gas and fifteen times for using a large amount of gas.

The company is now trying to get approval rom the Public Service Commission for this change, as well as other modifications that are being made based on customer complaints.

Some customers also charged that Con Edison borough offices were treating customers differently. Sources within Con Edison agree that some supervisors are more flexible, allowing more changeovers without penalties.

To treat customers equally, Con Edison is proposing that the penalty cost be imposed across the board, even if the boiler is down for servicing. Its proposed tariff changes state. "Customer notification of equipment failure shall not excuse the customer from penalty billing," while "prior notification of equipment failures will remain a customer responsibility, but will only be used for information and system load planning purposes."

"If that is their policy we will be complaining to the Public Service Commission," said Margulies. "The alternative is not to switchover and let the tenants freeze, nor is the penalty appropriate when there is an emergency situation and they need to do work on the system."

Margulies also complained about Con Edison's "sloppy" inspection techniques and allegations of tampering with equipment that in the past were found to be inaccurate. "Brooklyn Union Gas has similar provisions but it doesn't raise as many problems," noted Margulies. "It's also true that in Brooklyn you are treated better."

Robert Loftus, a spokesperson for Brooklyn Union Gas said, Whatever posture we take it would be reasonable with our customers."