BILL ANALYSIS
SB 2166
Page 1
Date of Hearing: June 23, 1998
ASSEMBLY COMMITTEE ON JUDICIARY
Martha Escutia, Chair
SB 2166 (Costa) - As Amended: June 16, 1998
SUBJECT : PUBLIC UTILITIES: SERVICES TO TENANTS
KEY ISSUES :
1) SHOULD UTILITIES BE PROHIBITED FROM REQUIRING TENANT UTILITY
SERVICE TO BE BILLED DIRECTLY TO THE LANDLORD UNLESS THE
LANDLORD AGREES AND THE TENANT IS UNCREDITWORTHY?
2) SHOULD THE LIEN EXEMPTION THAT CURRENTLY APPLIES TO DELINQUENT
FEES OR CHARGES RESULTING FROM THE FURNISHING OF WATER SERVICE
TO RESIDENTIAL PROPERTY ALSO APPLY TO SEWER SERVICE?
SUMMARY : Clarifies permissible public utility billing practices
relating to tenants. Specifically, this bill :
1) Prohibits municipally owned utilities and municipal utility
districts [MUDs] from requiring that service to subsequent
tenants be furnished on the account of the landlord or the
property owner unless the property owner voluntarily agrees to
that requirement and the entity determines that the subsequent
tenant is not creditworthy.
2) With respect to liens that may be obtained by a MUD on
delinquent accounts, provides the same exemption for delinquent
fees or charges for the furnishing of sewer service that
currently applies to the furnishing of water service to
residential property.
3) Repeals the provision which prohibits any MUD furnishing water
service for residential use to a tenant under an account
established by the tenant, from seeking to recover any charges
or penalties for the furnishing of water service from any
subsequent tenant or the property owner due to nonpayment of
charges by a previous tenant.
EXISTING LAW :
1) Prohibits any municipally owned utility or MUD furnishing
services for residential use under an account established by a
tenant, from seeking to recover any charges or penalties for
the furnishing of services from any subsequent tenant or the
property owner due to nonpayment of charges by a previous
tenant. (Public Utilities Code Sections 10009.6(a),
12822.6(b). All further statutory references are to this Code
unless otherwise noted.)
2) Imposes basically the same prohibition as above on both
municipally owned utilities and MUDs, but it is limited to the
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provision of water (not sewer) service for residential use.
(Section 10016(a)[municipally owned utilities]; Section
12811.5(a)[MUDs].)
3) Prohibits municipally owned utilities and MUDs from requiring
that service
to tenants be furnished on the account of the property owner
unless the property owner consents to that requirement through a
written agreement. (Sections 10009.6(b), 10016(b), 12811.5(a),
12822.6(b).)
4) Provides that accounts of a MUD that are delinquent generally
become a lien on the property, but exempts from that provision
delinquent fees or charges for the furnishing of water service
to residential property, or electrical service. (Section
12811.1(e).)
5) Provides that a decision of a municipally owned utility or a
MUD to require a new residential applicant to deposit a sum of
money with the public utility prior to establishing an account
and furnishing service must be based solely upon the
creditworthiness of the applicant as determined by the utility.
(Sections 10009.6(a), 12822.6(a).)
FISCAL EFFECT : Unknown
COMMENTS : According to the author, this bill "clarifies who
should be the customer of record concerning water and sewer
service bills. It also straightens out who should pay a
delinquent utility bill."
The author states that two years ago, Assemblymember Brewer
successfully carried legislation (AB 1770) addressing delinquent
utility bills. However, the author contends that since that time
some problems have developed which this bill attempts to resolve.
According to the author, those problems are:
- Some municipal and public utilities providing water and sewer
service are attempting to collect the delinquent utility bill of a
tenant from the landlord or the new tenant. The author contends
that this is an unjust result which the Brewer bill attempted to
end. The author believes this bill clearly provides that recovery
should only be against the customer of record. "After all, that
customer incurred the bill and he or she should pay for it."
- Landlords are being pressured to place the service in their name
when a former tenant refuses to pay a debt he or she incurred.
The bill states that if the landlord voluntarily agrees and if the
new tenant is not creditworthy, the service may be placed in the
name of the owner.
Background : There are at least two types of public utilities:
"municipally owned utilities," which are public utilities owned by
cities; and "municipal utility districts" (MUDs), which are
special districts organized for the purpose of providing utility
service. There are hundreds of "municipally-
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owned utilities" in the state, but there are only two major MUDs:
the East Bay Municipal Utility District (EBMUD), which provides
water and sewer service, and the Sacramento Municipal Utility
District (SMUD), which provides electrical service.
Under the law prior to AB 1770 (Brewer, Ch. 24, Stats. of 1996),
municipal utilities and MUDs had the authority to require that a
new service account be established in a landlord's or property
owner's name rather than a tenant's name. This authority was
limited to situations where a previous tenant had been delinquent
in payment for services under an account established in the
tenant's name. The law also authorized (and continues to
authorize) MUDs to impose liens against property when a tenant's
account for certain services was delinquent; however the lien
authority does not apply to delinquencies for water service to
residential property or electrical service. Property owners
complained that it was unfair to require them to assume
responsibility for utility services provided to a tenant for
delinquent charges to a tenant's
account. The law was changed with the passage of AB 1770 to only
allow property owners to assume the responsibility for a tenant's
water service voluntarily. In addition, utility companies were
given the ability to require security deposits from tenants deemed
uncreditworthy.
ARGUMENTS IN SUPPORT : According to supporters, public utilities
continue to strong-arm landlords into paying the debts of their
tenants, despite AB 1770. Now, the sponsor asserts, instead of
placing a lien on the property, or passing on the debt to the
landlord when a tenant defaults on a debt, utilities are simply
not establishing new water service unless the landlord agrees to
accept responsibility. This circumstance, they believe, is
exactly what AB 1770 was designed to prevent.
In addition, supporters claim that public utilities which provide
combined billing for water and sewer services are reading the law
too narrowly to avoid the terms of AB 1770, as the law expressly
mentions only water (and not sewer) service. According to the
sponsor, a large majority of public utilities combine water and
sewer billing, necessitating the need for this change. Finally,
the sponsor believes this is a matter of fairness; public
utilities are in contractual privity with tenants, they collect
security deposits from them, and should not be allowed to seek
remedy for default with anyone other than the "deadbeat" tenant or
hide behind a narrow reading of the law.
ARGUMENTS IN OPPOSITION : The California Municipal Utilities
Association (CMUA) opposes the bill for two reasons. "First, the
bill would restrict the ability of a city-owned utility or
municipal utility district to ask a landlord of a residential
rental property to become the customer. Under existing law the
landlord has the discretion to decline such a request, but this
measure would not allow the utility to even make a request unless
the utility first determined that a tenant and prospective
customer is not creditworthy. Second, the bill would prohibit a
municipal utility district from liening residential property for
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unpaid sewer bills. Since sewer service cannot be terminated in
the same manner as water or electric service, for example, a lien
on the property is the only practical remedy for collecting unpaid
sewer bills. Eliminating this authority would increase losses for
unpaid sewer bills."
East Bay Municipal Utility District (EBMUD) opposes the bill
unless it is amended. EBMUD believes that existing law provides
adequate protection for property owners and landlords in the event
of non-payment of a service account by a tenant. EBMUD would be
willing to remove its opposition if the bill were amended to
delete provisions in the bill they assert are unfair. They state
these provisions place a higher burden on municipal utility
districts to determine that the subsequent tenant is not
creditworthy before allowing the public agency to seek voluntary
consent by the property owner to establish the account in his or
her name. EBMUD believes this is an unnecessary burden upon
public utilities because, in their view, existing law already
provides sufficient protections for landlords and property owners
against bearing the responsibility for payment of tenant accounts.
Elimination of unnecessary provisions : As noted above, the bill
would delete Section 10016 of the Public Utilities Code which
relates only to water bills. According to the author, this
amendment was made only after consulting with Legislative Counsel,
the California Municipal Utilities Association and others who
concluded that there is no apparent need for Section 10016 since
Section 10009.6 contains the same basic prohibition, including not
only water but also sewer and other residential services.
SUGGESTED TECHNICAL AMENDMENT : Since the statutes governing MUDs
are parallel to the above provisions, the author may wish to amend
the bill to also delete Section 12811.5 which relates only to
water bills since Section 12822.6 already covers water, sewer and
other residential services.
PRIOR LEGISLATION : AB 1770 (Brewer), Chapter 24, Statutes of
1996.
REGISTERED SUPPORT / OPPOSITION :
Support Opposition
CA Association of Realtors (sponsor) CA Municipal Utilities
Association
Berkeley Property Owners AssociationEast Bay MUD
Apartment Association, CA Southern Cities
Analysis prepared by : Dan Pone / ajud / (916) 319-2334