Public Utilities – Operating as a Public Utility – Billing Tenants Via Third-Party Contractor

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Apartment owners’ billing and allocation of water and sewer costs through a third-party contractor did not constitute operation as a public utility.

We affirmed the orders of the Public Service Commission (PSC) dismissing tenants’ complaints.

Tenants challenged the utility billing practices of Respondents Strata Audubon and Strata Veridian . Appellants, tenants at the respective apartment complexes, claimed Respondents operated as public utilities under South Carolina law by billing tenants for water and sewer services through a third-party contractor, Conservice, LLC, and therefore should be subject to PSC regulation. They further argued the PSC’s decisions deviated from prior orders without adequate justification and included factual findings not supported by substantial evidence.

The underlying properties, Audubon Park Apartments in Berkeley County and Grove Apartments in Spartanburg County, are owned by Respondents and managed by Pinnacle Property Management. Neither complex had submetering infrastructure for water or sewer; instead, the Respondents allocated utility costs to tenants based on a formula outlined in the lease addendums. At Audubon, costs were allocated by the number of residents in each unit, while at Veridian, allocation considered both unit square footage and number of residents. Initially, Appellants filed suit in the Berkeley County Court of Common Pleas, seeking a declaration that the utility charges were unlawful without PSC approval. That case was removed to federal court, which dismissed it without prejudice for failure to exhaust administrative remedies, prompting Appellants to pursue relief directly with the PSC.

The PSC dismissed the complaint, finding Respondents did not provide water or sewer services themselves but merely facilitated billing and allocation. Key factual findings included that Respondents lacked submetering infrastructure, did not contract directly with utility providers for individual tenant service, did not possess monopoly rights, and did not obtain guaranteed profits from the allocation system. The PSC concluded that mere metering and billing functions are insufficient to constitute operating a public utility under S.C. Code § 58-5-10(4), which defines a public utility as an entity furnishing or supplying services to the public for compensation. Substantial evidence supported these conclusions, including affidavits and testimony showing that all costs were passed through to tenants on a not-for-profit basis.

Appellants also contended the PSC departed from prior orders, specifically one that had suggested that submetering landlords could be considered public utilities. The Court of Appeals noted that the PSC had vacated the earlier order in 2003, rendering the prior reasoning inapplicable. Finally, Appellants challenged certain factual findings as immaterial or unsupported, but the Court found that the PSC’s determinations regarding allocation methods, lack of infrastructure ownership, and absence of control over service flows were adequately supported by evidence.

The Court concluded Respondents merely provided allocation and billing services and did not operate as public utilities. Consequently, the PSC correctly determined it lacked jurisdiction over the complaint.

Affirmed.

Zito v. Strata Audubon LLC (Lawyers Weekly No. 011-002-26, 11 pp.) (Stephanie P. McDonald, J.) Appealed from The Public Service Commission. Frederick Elliotte Quinn, IV, and Rachel Igdal, both of The Steinberg Law Firm, LLP, of North Charleston, for Appellants. Kevin A. Hall and Bryant Sparks Caldwell, both of Womble Bond Dickinson (US), LLP, of Columbia, for Respondents. South Carolina Court of Appeals