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In the Matter of A Pilot Program Allowing Sub-Metering (Formerly Check-Metering)

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 17, 2012

IN THE MATTER OF A PILOT PROGRAM ALLOWING SUB-METERING (FORMERLY CHECK-METERING)
IN RESIDENTIAL PROPERTIES REGULATED BY THE NEW JERSEY HOUSING AND MORTGAGE FINANCE AGENCY.

On appeal from the New Jersey Board of Public Utilities, Docket No. A005080734.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 14, 2011

Before Judges Fuentes, J. N. Harris and Koblitz.

At the request of the New Jersey Housing and Mortgage Finance Agency (NJHMFA), the Board of Public Utilities (BPU) entered an Order approving a five-year sub-metering*fn1 pilot program on September 19, 2005. The terms of the pilot program were set out in a Memorandum of Understanding (MOU) executed by the BPU and NJHMFA on December 6, 2005. In its Order, the BPU emphasized that, notwithstanding the pilot program, it remained committed to the long-established policy prohibiting sub-metering in "residential multi-unit housing."

Appellant Marineview Housing Company I, the owner of a complex consisting of 432 moderate-income residential units in Hoboken, was accepted to participate in the sub-metering pilot program. On March 15, 2007, NJHMFA approved Marineview's proposal to spend $255,000 from Marineview's Reserve and Replacement Account to install sub-metering equipment at the Hoboken site. On October 26, 2007, NJHMFA approved reductions in rent for tenants at Marineview, in response to and commensurate with the utility charges tenants were required to pay as a result of the sub-metering.

Appellant Union Plaza Associates, L.P., the owner of a complex consisting of three buildings containing 240 residential units in Union City, was also accepted to participate in the sub-metering pilot program. As a result, on July 18, 2006, NJHMFA approved Union Plaza's proposal to spend $212,500 to install sub-metering equipment at the Union City property. As was the case with Marineview, Union Plaza installed the equipment and sent notices to its tenants advising them of the proposed rent reduction and commensurate responsibility to pay for utility charges.

Sub-metering was immediately opposed by the tenants of both Marineview and Union Plaza. In fact, sub-metering was never implemented at Union Plaza due to legal action filed by the tenants in the Hudson vicinage. There were also alleged billing discrepancies and other problems at the Marineview site, where apartments have electric heating and cooling systems. Tenants alleged that they were being held responsible for exorbitant utility charges caused by an outdated and inefficient electrically powered heating and cooling system, over which they did not have any control.

The BPU considered and reviewed these and other reported problems with sub-metering at a number of meetings in 2009. Finally, on October 28, 2009, the BPU issued an order directing NJHMFA, Marineview, and Union Plaza to show cause why the Sub-Metering Pilot Program should not be suspended. In response, the BPU received briefs and comments from the three parties at issue, as well as from the associations representing the tenants at both Marineview and Union Plaza, the Division of Rate Counsel,*fn2 and a number of elected officials from the affected municipalities. In the interest of fairness, the BPU permitted Marineview and Union Plaza to respond to the comments made and arguments raised by the groups or individuals opposing the program.

On December 10, 2009, the BPU issued a formal order pursuant to N.J.S.A. 48:2-40, "suspending" the Sub-Metering Pilot Program. In this order, the BPU comprehensively reviewed the history and shortcomings of the program. The BPU also emphasized that, from the program's inception, it considered sub-metering to be in "contravention" of its long-established policy against such an approach. It was for this reason that the BPU had selected NJHMFA as the agency to implement the pilot program because it had "certain oversight and financial control over residential buildings." The experience with sub-metering in the two sites selected here proved to be inequitable to the tenants.

On appeal to this court, Marineview and Union Plaza argue that the decision of the BPU was unfair, capricious and unreasonable; was not based on competent evidence; and deprived them of their property without due process of law. Specifically, appellants argue that they spent hundreds of thousands of dollars retrofitting their respective buildings in order to accommodate the pilot sub-metering program, with the reasonable expectation that it would receive a fair and impartial evaluation. Instead, appellants argue that the BPU terminated the program after it succumbed to political pressure exerted by local politicians and tenants' advocacy groups.

We reject these arguments and dismiss the appeal for failure to present a justiciable issue. Janicky v. Point Bay Fuel, Inc., 410 N.J. Super. 203, 208 (App. Div. 2009). Under the express terms of the MOU executed between the BPU and the NJHMFA, the sub-metering program was clearly defined as a pilot, experimental undertaking scheduled to end in September 2010 with no assurance of continuance. The subsequent agreements between the NJHMFA and Marineview and Union Plaza incorporated the terms of the MOU. Appellants were clearly on notice that any funds used to retrofit their properties to accommodate the sub-metering program were spent at the risk that the program would not be approved by the BPU for continuation.

The essence of a pilot program is its tentative character. Innovation and progress are possible only when public agencies are free to experiment and test the efficacy and wisdom of public policy initiatives. Commc'ns Workers v. N.J. Dep't of Pers., 154 N.J. 121, 128 (1998).

Appellants understood and assumed the risks involved in participating in this pilot program. The BPU made clear that the sub-metering pilot program was in direct contravention of existing policy against sub-metering. Any change in this policy requires formal action by the BPU pursuant to the Administrative Procedure Act, N.J.S.A. 52:14B-1 to -15.

Appeal dismissed as moot.


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