Section 4.11 Computation of Passthrough of Gas and Electricity

(Amended June 17, 1986; amended August 24, 2004)

            The following provisions shall apply to utility passthroughs where the notice of rent increase for the utility passthrough was served prior to or on November 1, 2004, except that with respect to such utility passthroughs, the passthrough shall be discontinued twelve months after it was imposed or by December 31, 2004, whichever is later.

(a) No landlord may pass through any increase in the cost of the utilities to a tenant until the tenant has occupied one or more units in the subject building for one continuous year. Each utility passthrough may be charged to the tenant only at the time of an annual rent increase.

(b) Where a landlord pays for gas, electricity, and/or steam and seeks to recover the increase in the cost of these utilities from tenants, the landlord shall calculate the amount of such increase by using either of the following two methods, both of which should always yield the same results:

(1) Method 1:  Compile the utilities receipts for the two calendar years preceding the first noticing of the utility passthrough. The calendar year immediately preceding the noticing shall be referred to as the "comparison year;" the calendar year preceding the "comparison year" shall be referred to as the "base year." The base year will remain the same for all future calculations, except where the pass through is discontinued pursuant to subsection (c) below. Different tenants in the same building may have different base years depending on when they moved into the building and when utility increases were first passed through to them.

(i) Calculate the total utility cost for the comparison year and the total utility cost for the base year.

(ii) Subtract the total base year utility cost from the total comparison year utility cost. If there is no increase or if there has been a decrease, no pass through for the current calendar year is allowed and any increase levied in a prior year must be discontinued.

(iii) Divide the resulting figure, if greater than zero, by 12 to determine the average monthly utility increase or decrease for the entire building.

(iv) Divide the average monthly utility increase or decrease by the number of rooms in the building. For the purposes of this section the number of rooms in a building shall be calculated by presuming that single rooms without kitchens are one room units, studios are two room units, one bedroom units without a separate dining room are three room units, and so on.

(v) If a utility pass through has been instituted, subsequent passthroughs shall be determined for the immediately following year by calculating the utility cost for the calendar year preceding the noticing of the passthrough. This amount shall become the updated comparison year figure. The passthrough shall then be calculated in accordance with Rules and Regulations Sections 4.11(b)(1)(ii) through 4.11(b)(1)(iv).

(2) Method 2:  Alternatively, the landlord may choose, in subsequent years, to use the prior year's "comparison year" as the current base year and subtract the updated base year amount from the new comparison year total utility cost. The resulting amount would be added to the prior year's total utility passthrough. The passthrough shall then be calculated in accordance with Rules and Regulations Sections 4.11(b)(1)(iii) through 4.11(b)(1)(v).

(c) Until such time as an annual rent increase is noticed the current pass through shall remain in effect. However, if a landlord does not recalculate and re-notice the pass through at the subsequent annual rent increase, the entire pass through is discontinued until recalculated and re-noticed. At such time as a new pass through is calculated and noticed, a new base year is established which shall be the calendar year preceding the new comparison year.

(d) In the event that more than one year has passed since the imposition of the last PG&E pass through, the landlord must adjust for any increases or decreases that have occurred since the last pass through was implemented, so that the tenant receives the benefit of any utility decrease that occurred in the intervening period.

(e) Nothing in this section or in these Rules and Regulations shall be interpreted as requiring any landlord to pass through any utility increase or to raise any tenant's rent. However, where the utility costs decrease in years subsequent to the passing through of an increase, the tenant must be given the benefit of such decrease calculated in the same manner as any increase passed through under Ordinance Section 37.2(n). A tenant may petition the Board for an arbitration hearing whenever a pass through charge has been noticed or is in effect and the tenant protests the amount being charged or the calculation procedure being used by the landlord. If the comparison year utility costs fall below the base year costs, the landlord shall not be required to reduce the rent beyond eliminating any utility pass through made in prior years.

(f) If the methods set forth for an increase (or decrease) in utilities in subsection (b) of this Section cannot be applied for reasons beyond the control of the landlord, and in the absence of a relevant agreement between the landlord and the tenant, the landlord may petition the Board for an arbitration hearing to establish an appropriate alternative method, which shall be used for all following years unless another method is approved by the Board.

(g) The amount of rent due from the tenant for any utility pass through shall be due on the same date as a rent payment normally would be due.

(h) No amount passed through to the tenant as a utility increase shall be included in the tenant's base rent for purposes of calculation of the amount of rent increases allowable under the Ordinance and these Rules and Regulations.

(i) The provisions of this Section shall be deemed a part of every rental agreement or lease, written or oral, for the possession of a rental unit subject to the Ordinance unless the landlord and the tenant agree that the landlord will not pass through any utility increases, in which case such agreement will be binding on the landlord and on any successor owner of the building, unless such agreement is changed in accordance with applicable law.

(j) Where a utility increase has been lawfully passed through to the tenant, a change in the ownership of the building in which the tenant's unit is located will not affect the tenant's liability to pay the amount passed through or the tenant's entitlement to the benefit of decreases in the utilities costs.