Ohio renters face utility markups up to 40 percent

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COLUMBUS, Ohio - Ohioans who rent apartments and condominiums pay markups for utilities between 5 percent and 40 percent when their landlords sign contracts with some third-party companies that make big profits from reselling electricity and water, a newspaper investigation has found.

The companies are unregulated, and if customers are unable or refuse to pay, and can resort to collection tactics that are illegal for regulated utilities, such as shutting off the heat in winter and even eviction.

Yet no state agency has the authority to respond. That would require action by the Ohio Legislature, Attorney General Mike DeWine told The Columbus Dispatch (http://bit.ly/179ACyM ) in response to the newspaper's findings.

"It seems to be a problem when you have a small minority of consumers who do not have those protections," DeWine said. "That, to me, would raise a lot of questions."

After a 10-month investigation, the newspaper found that up to 20,000 housing units in the Columbus area alone are affected and can pay markups of anywhere between 5 percent and 40 percent. The unregulated utilities also have the potential to affect up to 3 million Ohioans who live in apartments or condos, the newspaper found.

Here's how it works: A submeter company buys the utility meters and distribution system within an apartment complex. It then buys electricity or water, or both, from utilities and sells them to tenants, often at inflated prices and with fees.

Sometimes, the submeter companies are owned by principal owners of apartment complexes.

Complains and questions about such companies are on the rise, with 5,137 inquiries to the Central Ohio Better Business Bureau since October last year. That's up 33 percent from the year before.

Complaints commonly are about high bills and unresponsive customer service, said Joan Coughlin, a vice president in the office.

"We had consumers state that they moved from a larger residence to a smaller apartment and had their utility costs increase," she said.

Many other states, utility resale is banned. States that allow it like Ohio include Pennsylvania, Alabama, Georgia, South Carolina, Kansas, Utah and Washington.

"Allowing markups for submetering is just bad policy," said Janine Migden-Ostrander, the former Ohio Consumers' Counsel who is now a principal at the Regulatory Assistance Project, a national nonprofit group that advises regulators on utility policy. "They aren't providing the customer with any real service that they wouldn't otherwise get from the utility company. There is no value added for the customer."

Bill Finissi, vice president of the central Ohio submeter company American Power & Light, said in an email that all tenants "enter into agreements with our company with eyes wide open and with full knowledge of the leasing contract provisions."

He said costs to customers also include a share of common-area electronic usage, such as hallways, and a charge for submetering and administration.

"This is our business model which prospective tenants have complete freedom to accept or not," he said. "By the way, if we didn't do it this way, these extra costs, which are essential costs of providing apartment housing, would need to be included in the rent."

Consumer advocates say they would prefer that such charges were included in rent to make it easier for tenants to see the true costs when they shop for housing, as opposed to being surprised by high utility bills.

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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