# Petition for Writ of Certiorari — Philadelphia Housing Authority Authority v. McDowdell (No. 05-866)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2005

## Text

rather than harming the PHA’s residents, had resulted in
excess utility allowance rent reductions and payments for the
residents. (App. 14a 4] 5-7). The district court consequently
held that the residents had suffered no actual injury despite
the fact that PHA had not revised its gas utility allowances.
(App. 14a J 6). It therefore denied the plaintiff class’s re-
quest for retroactive monetary relief. (App. 14a 4 6).

The United States Court of Appeals for the Third Circuit,
however, on September 13, 2005 reversed the district court’s
denial of civil contempt sanctions. McDowell v. Philadelphia
Housing Authority, 423 F.3d 233 (3d Cir. 2005). (App. la-
12a). The Third Circuit held that PHA’s residents “were enti-
tled . . . to have their allowances recalculated based on the
increased rates and the consumption factor in effect at the
time.” (App. lla). The Third Circuit ruled that PHA’s over-
statement of the consumption factor could not be considered
and ordered the district court to calculate and grant residents a
compensatory civil sanction against PHA in the amount of the
difference between the allowances received by tenants and
increased utility allowances based solely on the gas rate in-
creases and the unrevised utility consumption factor that PHA
had used in 2000-02. (App. 1 la-12a).

REASONS FOR GRANTING THE PETITION

The Third Circuit’s opinion conflicts with the decisions of
this Court and other Courts of Appeals both on the limits and
extent of the courts’ civil contempt powers and on the meas-
ure of harm from violation of procedural rights. In addition,
the impact of the Third Circuit’s decision extends far beyond
this Consent Decree and these parties, as the opinion inter-
prets and effectively rewrites HUD’s public housing utility
allowance regulations.

8

A. The Third Circuit’s Opinion Conflicts with the
Decisions of this Court and Other Circuits Lim-
iting the Courts’ Civil Contempt Powers

This Court has made clear that civil contempt sanctions for
past conduct can be permitted only where the complainant
was harmed by the violation of the court order and that such
sanctions must be limited to compensation for the harm the
violation caused. /nternational Union, United Mine Workers
of America v. Bagwell, 512 L.3. 821, 827-34 (1994); United
States v. United Mine Workers of America, 330 U.S. 258,
303-04 (1947).

The Third Circuit’s requirement that the district court
award compensatory retroactive civil contempt sanctions to
the piaintiff class based solely on increased gas rates directly
disregards and conflicts with these limitations on the con-
tempt power. The Consent Decree and HUD’s regulations
required that PHA “revise” its utility allowances, not that
PHA increase the allowances. (App. 4a; App. 22a, 24 C.F.R.
§ 965.507(b)). In contrast, the Consent Decree used the term
“increase” when PHA was required to automatically raise
utility allowances based on rate increases without regard to
other factors. (App. 25a). The Consent Decree’s requirement
that PHA “revise” the allowances therefore could not prop-
erly be read to require an increase based solely on rate
changes and the utility rate component. Instead, it required a
revision of the allowances consistent with HUD regulations,
which not only would address the rate increase but could also
include consideration of other factors bearing on the appropri-
ate utility allowance. The consumption component is such a
factor that HUD regulations require that housing authorities
consider in setting and revising utility aliowances. 24 C.F.R.
§965.505, § 965.507(a).

The Third Circuit’s reasons for excluding the consumption
component were invalid. While paragraph 8 of the Consent
Decree does not list utility consumption as a factor in the

9

utility allowance revisions that it requires, it also does not
exclude or prohibit consideration of the consumption compo-
nent and neither lists nor limits any of the factors that may be
included in the revision. Neither paragraph 8 of the Consent
Decree nor the HUD regulation which it tracks, 24 C.F.R.
§ 965.507(b), states that only adjustments to the rate compo-
nent may be included in a revision. The rate change is thus a
trigger for the need and right to revise utility allowances, and
not a specification or restriction on what may be included in a
revision. Moreover, PHA was clearly and expressly entitled,
under both paragraphs 6 and 7 of the Consent Decree and
HUD regulation 965.507(a), to revise the consumption factor
in the annual reviews that were required in this same time
period. (App. 3a; App. 2la-22a, 24 C.F.R. § 965.507(a)).
Compliance with the Consent Decree therefore would have
permitted revisions in the consumption factor even under the
Third Circuit’s cramped reading of paragraph 8 and Section
965.507(b).

HUD’s 60-day notice requirement, 24 C.F.R. § 965.502(c),
likewise does not preclude a housing agency from including
valid, supported changes in the consumption component in the
required revisions to utility allowances. Section 965.502(c)’s
notice requirement does not apply, as the HUD regulation
concerning revisions triggered by rate increases specifically
exempts such revisions from the notice requirement. 24
C.F.R. § 965.507(b) (App. 22a).

Because the only violation of the Consent Decree was fail-
ure to revise the gas utility allowances and PHA was not
required to automatically or proportionately increase the al-
lowance if no increase was warranted under all appropriate
factors, the Third Circuit’s ruling conflicts with this Court’s
limitations on civil contempt sanctions. Had PHA undertaken
to revise the gas utility allowances at the time of the PGW
rate increases, it would have been entitled to consider the
consumption data available and in existence in the 2000-02

10

period and which demonstrated that the consumption compo-
nent was grossly excessive. Had PHA revised its gas utility
allowances in 2000-02, it would not have been required to
raise the allowances and in fact could have lowered them,
given that the overstatement of the consumption component
far exceeded the increases in gas rates. The residents there-
fore suffered no actual loss from PHA’s failure to conduct
revisions of the allowances and were in fact benefited by the
failure to revise. The civil contempt sanctions ordered by the
Third Circuit are thus inconsistent and incompatible with the
requirement that civil contempt sanctions for past conduct be
limited to plaintiffs’ actual loss.

The Third Circuit’s ruling that residents were entitled to
compensatory civil contempt sanctions based on benefits that
they would not have received under full compliance with the
Consent Decree also conflicts with the decisions of other
_ circuits. The Court of Appeals for the Tenth Circuit has held
that a defendant must be allowed to offset, against the plain-
tiffs’ claimed losses, benefits that plaintiffs received from the
conduct that violated an injunction. Federal Trade Commis-
sion v. Kuykendall, 371 F.3d 745, 766-67 (10th Cir. 2004)
(civil contempt defendants must be allowed to offset, against
total sales from improper telemarketing, amounts paid by
customers where customer was satisfied with the purchase
and would not rescind despite improper solicitations). The
Third Circuit, in contrast, refused to allow PHA to offset
against the gas rate increase the benefit, an unreasonably high
consumption factor, that plaintiffs received from PHA’s fail-
ure to revise the allowances. (App. 7a-1 2a).

The Court of Appeals for the Eighth Circuit has reversed
civil contempt sanctions because defendants’ violation of an
injunction did not cause the harm suffered by plaintiffs,
where compliance with the injunction’s procedural require-
ments would not have changed the loss incurred by plaintiffs.
McBride v. Coleman, 955 F.2d 571, 577-78 (8th Cir. 1992)

1]

(civil contempt damages cannot be awarded for government’s
failure to comply with notice obligations of court’s injunction
where same harm would have occurred even if defendants
had given the notice required by the injunction). The Third
Circuit here, in contrast, required civil contempt sanctions
even though compliance would not have resulted in any
benefit to plaintiffs.

B. The Third Circuit’s Decision Affects the Inter-
pretation of HUD’s Utility Allowance Regulations
and Conflicts with the Fourth Circuit’s Interpreta-
tion of those HUD Regulations

The Third Circuit’s opinion is not limited to construction
and enforcement of a consent decree between these parties.
Not only is the Consent Decree language based on and similar
to HUD’s utility allowance regulations, but the Third Circuit
in its opinion specifically considered, relied on and inter-
preted those HUD regulations. (App. 8a-10a). The impact
of the decision therefore extends far beyond the parties and
affects the application and enforcement of HUD’s public
housing utility allowance regulations throughout the country.

Under the Third Circuit’s ruling, HUD’s utility allowance
revision regulation, 24 C.F.R. § 965.507(b), has been rewrit-
ten to prohibit housing authorities from considering factors
other than utility rates in revising their utility allowances.
(App. 8a-10a). The Third Circuit held that Section 965.507(b)
refers to “adjustments based on rate changes of 10% or more
but does not mention adjustments based on consumption
changes” and therefore does not permit reasonable consump-
tion to be considered in utility allowance revisions triggered
by rate increases. (App. 8a). Effectively, the Third Circuit’s
opinion requires housing authorities to base utility allowances
on invalid, inaccurate and excessive consumption estimates
and to automatically increase utility allowances based solely
on rate increases, even if the resulting allowance would —
violate HUD’s standards for reasonable utility allowances,

12

24 C.F.R. § 965.505. This directly conflicts with the core
and central purpose of the HUD regulations, which provide
that “[t]he objective of a PHA [public housing agency] in

. establishing utility allowances ... shall be to approxi-
mate a reasonable consumption of utilities by an energy-
conservative household of modest circumstances.” 24 C.F.R.
§ 965.505(a) (emphasis added) (App. 19a).

The Third Circuit’s opinion, moreover, conflicts with the
Fourth Circuit’s interpretation of the HUD utility allowance
regulations. In Dorsey v. Housing Authority of Baltimore
City, 984 F.2d 622 (4th Cir. 1993), the Fourth Circuit inter-
preted HUD’s utility allowance regulations and held that non-
compliance with procedural mandates to revise utility allow-
ances does not automatically invalidate existing utility allow-
ances or necessarily require raising of the utility allowances.
984 F.2d at 632. Although it was undisputed in Dorsey that
the defendant housing authority had not revised its utility
allowances as required by HUD’s regulations, the Fourth
Circuit held that this could not support liability unless it was
shown that the resulting utility allowances did not satisfy
HUD’s requirements for reasonable utility allowances. 984
F.2d at 632 (“the regulations as a whole define the contours
of reasonability preclud[ing] us from piecemeal evaluation of
procedural regulations separate from the evaluation of the
reasonableness of the allowances”). The Third Circuit in this
case has taken a position diametrically opposite to the Fourth
Circuit, holding that failure to revise utility allowances re-
quires an automatic raising of allowances regardless of HUD’s
standards of reasonableness.

C. The Third Circuit’s Opinion Conflicts with the
Decisions of this Court and Other Circuits on the

Measure of Harm from Violation of Procedural
Rights

The noncompliance with the Consent Decree in this case
involved a procedural requirement, a requirement that a revi-

13

sion process be conducted when certain utility rate increases
occur. The Consent Decree did not require that utility allow-
ances be increased proportionately to or based solely on util-
ity rate increases. Rather, both it and the regulations that it
enforced and tracked required only that a revision be done to
make sure that the allowances remained in compliance with
HUD’s substantive requirements. (App. 3a-4a; App. 21a-22a,
24 C.F.R. § 965.507).

This Court has made clear that where violation of proce-
dural rights or procedural requirements is at issue, there is no
harm to plaintiff that can support a compensatory award if the
same outcome would have occurred even if the required
procedures had been fully provided and followed. Memphis
Community School District v. Stachura, 477 U.S. 299, 307-11
(1986); Carey v. Piphus, 435 U.S. 247, 260-66 (1978).

The Third Circuit’s judgment is directly contrary to these
decisions. The Third Circuit required the district court to make
a compensatory award based solely on utility rate increases,
notwithstanding the district court’s determination that the
procedure to which plaintiff residents were entitled, revision
of utility allowances, would not have given the residents that
different and more favorable outcome.

In this regard, the Third Circuit’s decision also conflicts
with decisions of other circuits. Other circuits have applied
this Court’s Carey v. Piphus standard to hold that no compen-
satory award for violation of procedural rights can be made
for economic harm from a government decision or act if
adherence to the procedural protections would not have
resulted in a different outcome. See, e.g., Kassim v. City of
Schenectady, 415 F.3d 246, 250 (2d Cir. 2005); Brewer v.
Chauvin, 938 F.2d 860, 864-65 (8th Cir. 1991).

14
CONCLUSION

The petition for writ of certiorari should be granted.

Respectfully submitted,

ALAN C. KESSLER
ABBE F. FLETMAN
Counsel of Record
VIRGINIA LYNN HOGBEN
STEPHANIE L. KOSTA
WOLF, BLOCK, SCHORR AND
SOLIS-COHEN LLP
1650 Arch Street, 22nd Floor
Philadelphia, PA 19103-2097
(215) 977-2000

January 5, 2006 Counsel for Petitioner
The Philadelphia Housing Authority

APPENDICES

la
APPENDIX A

UNITED STATES COURT OF APPEALS
THIRD CIRCUIT

No. 04-2609

JACKIE MCDOWELL, et al.
Vv.

PHILADELPHIA HOUSING AUTHO.* TY (PHA);
JOHN WHITE; BARRY MILLER

Jackie McDowell and the certified
class whom she represents,
Appellant

Argued May 27, 2005
Sept. 13, 2005

Rehearing and Rehearing En Banc
Denied Oct. 17, 2005 °

Before SCIRICA, Chief Judge, ALITO and GARTH,
Circuit Judges.

ALITO, Circuit Judge.

This case requires us to construe a consent decree. The
appellants, a class of tenants living in Philadelphia public
housing, moved the District Court to enforce the decree and
to cite the Philadelphia Housing Authority and two of its
employees (together, the “PHA”) for civil contempt. The
tenants alleged that the PHA had violated the decree by
failing to factor rising gas rates into allowances they were

* As to panel rehearing only.

2a

entitled to receive for their gas bills.. The District Court
denied the motion initially and on reconsideration, concluding
that the tenants could not show any actual provable injury as
a result of the PHA’s violations. It reasoned that the PHA
could offset its arrears by retroactively reducing the tenants’
allowances in light of evidence that tenant gas consumption
during the period of the violations had been overstated.

We disagree with this reasoning. The plain text of the
decree and applicable federal regulations do not permit the
PHA to revise the tenants’ allowances retroactively to correct
for historically overstated consumption. The tenants were
entitled to recover in the form of sanctions the difference
between the allowances they received and the allowances
they should have received based on the consumption factor
then in effect. The District Court erred in calculating their
loss based on the PHA’s revised figures, and its order
denying their motion is vacated.

I.

_ This case has its genesis in an April 1997 lawsuit filed
‘against the PHA by Jackie McDowell, a tenant in Philadel-
phia’s public housing system, The suit was brought in federal
court pursuant to 42 U.S.C. § 1983. McDowell’s complaint
alleged that the PHA had deprived her of her federal rights by
failing to factor rising gas rates into the gas allowances she
was entitled to receive under the United States Housing Act
of 1937, 42 U.S.C. § 1437 et seg. McDowell sought relief for
herself and for similarly situated tenants who were allegedly
owed allowances by the PHA. The plaintiff class was
certified in May 1997,

To understand the plaintiffs’ claims, some exposition of the
Housing Act and its accompanying regulations is necessary.
Under section 3(a)(1)(A) of the Act, as amended, a public
housing authority ordinarily may not require a tenant family
to pay more than 30% of its monthly adjusted income as rent.
42 U.S.C. § 1437a(a)(1)(A). Since the Department of Hous-

3a

ing and Urban Development (“HUD”) has interpreted “rent”
to include the reasonable cost of utilities, see, e.g., Tenant
Allowances for Utilities, 49 Fed. Reg. 31,399, 31,400 (Aug.
7, 1984); Wright v. Roanoke Redevelopment & Hous. Auth.,
479 U.S. 418, 420, 107 S.Ct. 766, 93 L.Ed.2d 781 (1987),
housing authorities must issue rebates to.tenants who pur-
chase service directly from a utility company. See West v.
Sullivan, 973 F.2d 179, 182 (3d Cir.1992); West v. Bowen,
879 F.2d 1122, 1129 (3d Cir.1989).

These rebates take the form of monthly allowances credited
toward the tenant’s rent. See 24 C.F.R. § 965.504(b). The
amount of the allowance is calculated “to approximate a
reasonable consumption of utilities by an energy-conservative
household of modest circumstances consistent with the re-
quirements of a safe, sanitary, and healthful living environ-
ment.” /d. § 965.505(a). Separate allowances are calculated
for each utility based on the utility company’s rates and a
consumption factor that takes account of the climate in which
the housing is located, the size of the dwelling units, and
other relevant circumstances. Jd. §§ 965.505(d), 965.507(a).
If a tenant’s utility bill exceeds the allowance, the tenant must
make up the difference; if the allowance exceeds the bill, the
difference may be pocketed. See West v. Bowen, 879 F.2d at
1129 & n. 8.

In January 1998, the parties agreed to settle McDowell’s
lawsuit. The stipulation of settlement read in pertinent part:

6. PHA shall, commencing with 1997, review, at least
annually, the basis on which utility allowances have
been established and, if reasonably required, shall estab-
lish revised allowances.

7. The annual review shall include all changes in cir-
cumstances indicating probability of a significant change
in reasonable consumption requirements and changes in
utility rates.

4a

8. PHA may revise its allowances for resident-
purchased utilities between annual reviews if there is a
rate change except that PHA shall revise its allowances
for resident-purchased utilities between annual [reviews]
if any change in utility rates, by itself or together with
prior rate changes not adjusted for, results in a change of
10 percent or more from the rates on which the
allowances were based.

9. Adjustments to utility allowances shall be retroactive
to the first day of the month following the month in
which the last rate change taken into account in such
revision became effective.

App. at 25. The terms of the settlement were incorporated
into a consent decree, which provided that the District Court
would retain continuing jurisdiction over the administration
and enforcement of the parties’ agreement. /d. at 29.

On December |, 2000, after three years of stability in gas
prices, the Philadelphia Gas Works (“PGW”) raised the
tenants’ rates by approximately 11%. A month later, it raised
them again. The PHA’s own data show that the tenants’ rates
exceeded the baseline rate at the time the decree was entered
by at least 10% during all but two months of the 25—month
period from December 2000 through December 2002. Despite
receiving several letters from the tenants’ counsel urging it to
revise the gas allowances, the PHA took no action on the rate
hikes. The PHA frankly admits that it “fell out of com-
pliance” with the decree during this period. PHA’s Br. at 5.

On October 30, 2002, the tenants filed a motion to enforce
the consent decree and to cite the PHA for civil contempt.
Under a settlement reached in December 2002, the PHA
agreed to increase the tenants’ gas allowances effective
January 1, 2003. The adjustment was not retroactive, how-
ever, and the parties’ agreement expressly left unresolved
whether the tenants were entitled to sanctions for the period

5a

of noncompliance from November 2000 through December
2002. The District Court fixed a briefing schedule to resolve
this issue and heard oral argument on it in July 2003.

The Court denied the tenants’ motion in an unpublished
order dated March 9, 2004. It found that the tenants had “not
suffered any actual provable injury as a result of any failure of
PHA to comply with the Consent Decree prior to January 1,
2003.” App. at 536. This finding was based on “[rjevised gas
consumption calculations for the period July 1, 1999, through
December 31], 2002,” which showed that the overstatement of
gas consumption during this period equaled or exceeded the
shortfalls in the allowances due to the higher rates. /d. The
revised calculations were provided by Sud Associates, P.A.
(“Sud’’), a consulting firm retained by the PHA.

The tenants moved for reconsideration under Federal Rule
of Civil Procedure 59(e). In addition to challenging the Dis-
trict Court’s construction of the consent decree, they argued
that the Court should have afforded them discovery of Sud’s
data and an evidentiary hearing to contest its findings. The
Court denied the motion on May 6, 2004, and the tenants
timely appealed on June 4 of that year, raising the same
claims rejected on their motion for reconsideration.

II.

The denial of a motion for reconsideration is reviewed for
abuse of discretion. See N. River Ins. Co. v. CIGNA Rein-
surance Co., 52 F.3d 1194, 1203 (3d Cir.1995). This standard
of review also applies to the underlying decision to deny the
motion to enforce the consent decree. See Holland v. N.J.
Dep't of Corrs., 246 F.3d 267, 281 (3d Cir.2001); Harris v.
City of Philadelphia, 47 F.3d 1342, 1349 (3d Cir.1995). An
abuse of discretion may occur as a result of an errant
conclusion of law, an improper application of law to fact, or a
clearly erroneous finding of fact. Chiang v. Veneman, 385
F.3d 256, 264 (3d Cir.2004).

6a

The proper construction of the consent decree is a question
of law that receives plenary review. See Holland, 246 F.3d at
270; Sansom Comm. ex rel. Cook v. Lynn, 735 F.2d 1535,
1539 (3d Cir.1984). The decision to deny the tenants
discovery and an evidentiary hearing is reviewed for abuse of
discretion. See United States v. Hedaithy, 392 F.3d 580, 605
(3d Cir.2004); United States v. Albinson, 356 F.3d 278, 281
& n. 5 (3d Cir.2004). Under these standards, vacatur may be
required if the District Court denied the tenants’ motions
based on a misconstruction of the decree or if it abused its
discretion in denying them discovery and an evidentiary hear-
ing. We discuss these claims in turn.

If.

Since a consent decree issued upon the stipulation of the
parties has the characteristics of a contract, contract principles
govern its construction. See Frew ex rel. Frew v. Hawkins,
540 U.S. 431, 437, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004);
United States v. New Jersey, 194 F.3d 426, 430 (3d Cir.1999).
One of these principles is that an unambiguous agreement
should be enforced according to its terms. See United States
v. New Jersey, 194 F.3d at 430 (citing Fox v. U.S. Dep’t of
Hous. & Urban Dev., 680 F.2d 315, 319-20 (3d Cir. 1982)).
Whether the decree is unambiguous is a question of law that
the Court decides by considering whether, “from an objec-
tive standpoint, [the decree] is reasonably susceptible to at
least two different interpretations.” /d. (citing Hullett v.
Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d
Cir.1994)).

If the decree is ambiguous, the Court may look to extrinsic
evidence of its meaning, see Thermice Corp. v. Vistron Corp.,
832 F.2d 248, 252 (3d Cir.1987), but ambiguities that persist
must be construed against the party seeking enforcement. See
Harris, 47 F.3d at 1350; accord FTC v. Kuykendall, 37\ F.3d
745, 760-61 (10th Cir.2004). This rule avoids imposing obli-
gations on the parties that they did not bargain for, and it

7a

ensures that a party has fair notice of what the decree requires
before the serious sanction of contempt is invoked. See
United States v. Armour & Co., 402 U.S. 673, 681-82, 91
S.Ct. 1752, 29 L.Ed.2d 256 (1971); Harris, 47 F.3d at 1350.

There can be no doubt that the consent decree obligated the
PHA to revise its gas allowances after the rate changes at
issue here. This duty emerges unambiguously from the plain
text of paragraph 8 of the decree, and the PHA does not deny
that this duty was breached. The interpretive question we
must answer is how the consent decree permitted the PHA to
remedy this breach. The PHA argues that the decree per-
mitted it to offset the shortfall in the allowances the tenants
received by revising estimates of tenant gas consumption
during the period when the violations were occurring. The
tenants argue that the PHA may not offset its sanctions in this
manner because the decree does not permit it to adjust-the
tenants’ allowances retroactively based on revised consump-
tion data.

We agree with the tenants. The only paragraph of the
decree that discusses consumption is paragraph 7, which
permits the PHA, in the course of an annual review, to
consider “all changes in circumstances indicating probability
of a significant change in reasonable consumption require-
ments.” App. at 25. The word “probability” plainly indicates
that the focus of the review is to be prospective. Although
paragraph 9 arguably gives limited retroactive effect to some
revisions based on consumption changes, it does not follow
that the revisions may be retrospective. The unambiguous
language of paragraph 7 indicates that revisions must correct
for “probab[le]” changes in consumption, not for past con-
sumption levels that, in retrospect, were overstated.

Paragraph 8 discusses retrospective adjustments but does
not mention consumption. It permits (and in some cases
requires) an adjustmc. it “if there is a rate change.” /d. In light
of the language of paragraph 7, which mentions both rate and

8a

consumption changes, the omission of consumption in para-
graph 8 is a significant one. A reading of the decree in its
entirety, aided by a straightforward application of the ex-
pressio unius canon, compels the conclusion that the PHA
may not revise the tenants’ allowances retroactively to correct
for historic overestimates of gas consumption.

This view is buttressed by HUD regulations whose
language the consent decree tracks. Under 24 C.F.R.
§ 965.502(c), the PHA must give at least 60 days’ notice to
all tenants before the “proposed effective date” of an
adjustment to their allowances. Section 965.507(b) carves out
an exception to the notice requirement for adjustments based
on rate changes of 10% or more but does not mention
adjustments based on consumption changes. Id. § 965.507(b).
Adjustments based on consumption changes thus remain
subject to § 965.502(c)’s notice requirement. Since such an
adjustment may not take effect until 60 days after the tenants
have received notice, retroactive adjustments are plainly
forbidden under the regulations.

The District Court disregarded the regulations, believing
that the tenants’ motion should be decided solely on the
consent decree, which contains no notice requirement. It is
true that a consent decree should be “construed as it is
written, and not as it might have been written had the plaintiff
established his factual claims and legal theories in litigation.”
Armour & Co., 402 U.S. at 682, 91 S.Ct. 1752. Because the
decree compromises litigation, it will rarely afford the
plaintiffs all the relief they would have obtained had the case
proceeded to a judgment in their favor. See id. at 681, 91
S.Ct. 1752; Harris, 47 F.3d at 1350. Ordinarily, therefore, a
court should confine its interpretation to the four corners of
the decree and not try to divine its meaning from speculation
about the purposes of the parties or the background legal
regime. See United States v. Atl. Ref. Co., 360 U.S. 19, 23, 79

9a

S.Ct. 944, 3 L.Ed.2d 1054 (1959); Hughes v. United States,
342 U.S. 353, 357, 72 S.Ct. 306, 96 L.Ed. 394 (1952).

Notwithstanding these principles, the Supreme Court has
indicated that relevant statutes and regulations may some-
times be used to shed light on the terms of a consent decree.
See United States v. ITT Cont’l Baking Co., 420 U.S. 223,
238, 240-41, 95 S.Ct. 926, 43 L.Ed.2d 148 (1975). The Court
in ITT Continental Baking Co. looked to section 7 of the
Clayton Act, 15 U.S.C. § 18, to help gloss the words
“acquire” and “acquisition” in an antitrust consent decree.
420 U.S. at 240-41, 95 S.Ct. 926. The Court defended its
reliance on this extrinsic evidence on two grounds. First, the
gloss supplied by the statute simply confirmed the meaning
that emerged naturally from the decree’s terms. See id. at 235,
95 S.Ct. 926. Second, the extrinsic evidence was being used
to determine not whether the decree had been violated but
what the appropriate sanction for the violation was. See id. at
237, 95 S.Ct. 926. Since the contemnor had clearly breached
some duty under the decree, there was no danger that he
would be sanctioned for contempt without fair notice of his
obligations. See id.

These rationales apply equally here. As we noted earlier,
the PHA concedes that it was in violation of the Court’s
order. It disputes only the amount of the sanction. In resolv-
ing this dispute, we may construe the decree “basically as
a contract,” and “reliance on certain aids to construction is
proper, as with any other contract.” /d. at 238, 95 S.Ct. 926;
see also United States v. New Jersey, 194 F.3d at 430 (per-
mitting the use of extrinsic evidence to interpret a decree);
Thermice Corp., 832 F.2d at 252 (same). For the reasons set
forth earlier, we believe the plain language of the decree did
not permit the PHA to offset its arrears by revising estimates
of tenant consumption. To the extent that any doubt remains
about the meaning of the decree, the regulations clearly

10a

resolve it in the tenants’ favor. In this respect, the regulations
do not guide our interpretation so much as confirm it.

The PHA submits that it was required to retroactively
revise the allowances because § 1437a(a)(1) does not allow
tenants to pay less than 30% of their monthly adjusted income
in rent. The PHA points to dicta in Wright v. Roanoke
Redevelopment & Housing Authority, in which the Supreme
Court explained that § 1437a permits a housing authority to
charge “no more and no less than 30 percent” of a tenant’s
income as rent. 479 U.S. 418, 430, 107 S.Ct. 766, 93 L.Ed.2d
781 (1987). According to the PHA, many tenants will end
up paying less than 30 percent of their income in rent if
allowances based on inflated consumption estimates are left
uncorrected.

Even if the language on which the PHA relies were
binding, it could not support the PHA’s argument. In 1998, -
over a decade after Wright was decided, Congress rewrote
§ 1437a(a)(2) and added the following language:

The monthly rental amount determined under this clause
for a family shall be an amount, determined by the
public housing agency, that does not exceed the greatest
of the amounts (rounded to the nearest dollar) deter-
mined under subparagraphs (A), (B), and (C) of para-
graph (1). This clause may not be construed to require a
public housing agency to charge a monthly rent in the
maximum amount permitted under this clause.

Quality Housing and Work Responsibility Act of 1998,
Pub.L. No. 105-276, § 523, 112 Stat. 2518, 2566 (codified
at 42 U.S.C. § 1437a(a)(2)(B)(i)(ID) (emphasis added). The
amendment takes pains to ensure that the amounts set forth in
§ 1437a(a)(1) are not construed as minimum rents. Once this
putative rent floor is removed, the PHA’s argument has
nothing left to stand on.

lla

There is consequently no merit to the District Court’s
conclusion that the tenants failed to show “actual provable
injury” resulting from the PHA’s violations. The sanction
imposed on a civil contemnor for his past conduct may not
exceed the actual damages caused by his violation of the
court’s order. See Gregory v. Depte, 896 F.2d 31, 34 (3d
Cir.1990) (citing Quinter v. Volkswagen of Am., 676 F.2d 969
(3d Cir.1982)). It does not follow, however, that the tenants’
actual consumption of gas is the baseline from which their
damages should be measured. As this Court explained years
ago in National Drying Machinery Co. v. Ackoff, the offended
party’s rights under the decree set the baseline for calculating
his loss:

Whether an award in civil contempt be measured in
terms of a plaintiffs loss or a defendant’s profit, such an
award, by very definition, must be an attempt to com-
pensate plaintiff for the amount he is out-of-pocket
or for what defendant by his wrong may be said to
have diverted from the plaintiff or gained at plaintiff's
expense.

245 F.2d 192, 194 (3d Cir.1957); see also Quinter, 676 F.2d
at 975 (“[I]n civil contempt proceedings enforcement of the
rights and remedies of a litigant is the ultimate object.”’); cf.
Leman v. KrentlerArnold Hinge Last Co., 284 U.S. 448, 455-
56, 52 S.Ct. 238, 76 L.Ed. 389 (1932) (permitting the: re-
covery of profits from a patent infringement in violation of a
court order even though the patentee could not show damages
resulting from the infringement).

For the reasons set forth above, the consent decree
permitted the PHA to revise estimates of tenant consumption
prospectively only. When PGW raised its rates, the tenants
were entitled under paragraph 8 of the decree to have their
allowances recalculated based on the increased rates and the
consumption factor in effect at the time. The difference be-
tween the allowances so calculated and the allowances the

12a

tenants received is the loss the tenants suffered and the
benefit the PHA reaped as a result of the latter’s contempt.
This is the tenants’ actual provable injury.

IV.

Because we conclude that the consent decree did not
permit the PHA to offset a shortfall in the tenants’ allowances
with revised estimates of tenant gas consumption, we need
not consider the tenants’ alternative argument that they were
wrongfully denied discovery and an evidentiary hearing to
contest the revisions. The order of the District Court denying
the tenants’ motion for reconsideration is accordingly
vacated. On remand, the tenants’ motion to cite the PHA for
civil contempt shall be granted, and an appropriate sanction
shall be calculated in the manner described above.

13a
APPENDIX B

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF PENNSYLVANIA

Civil Action No. 97-2302

JACKIE MCDOWELL, et al.
Plaintiffs,
V.

PHILADELPHIA HOUSING AUTHORITY, et al.
Defendants.

ORDER

AND NOW, this 9th of March, 2004, this matter having
come before the Court on plaintiffs Motion to Enforce
Consent Decree, and the Court having considered all papers
filed and proceedings held in connection with the motion, and
having heard arguments on the motion on July 17, 2003, the
Court FINDS and it is hereby ORDERED that:

1. Defendant, The Philadelphia Housing Authority
(“PHA”), has been in full compliance with the Stipulation of
the parties incorporated into this Court’s Order of January 12,
1997 (the “Consent Decree’’) since January 1, 2003.

2. The monthly customer charge of the Philadelphia Gas
Works (“PGW’”’) is not part of the gas “rate” for the purpose of
calculating changes of 10 percent or more, as is necessary for
compliance with paragraphs 8 and 9 of the Consent Decree.

3. PHA shall continue to adjust its gas utility allowance to
account for changes in PGW’s monthly customer charge. Any
such adjustment shall be made beginning on the first day of
the month following the effective date of the change in the
customer charge.

14a

4. Both reductions and increases in PGW’s gas rates are
“changes” for purposes of calculating changes of 10 percent
or more, as is necessary for compliance with paragraphs 8
and 9 of the Consent Decree.

5. The present motion before the Court involves en-
forcement of the Consent Decree. Therefore, 24 C.F.R.
§ 965.502(c) does not control disposition of this matter.
Pursuant to paragraph 6 of the Consent Decree, PHA was
required at least annually to review the basis on which gas
utility allowances had been established and, if reasonably
required, to establish revised allowances. Revised gas
consumption calculations for the period July 1, 1999, through
December 31, 2002, have been provided to the Court and
counsel for plaintiffs in the Final Report prepared by Sud
Associates, Inc. (dated March 2003). Counsel for the plaintiff,
although afforded an opportunity to do so, did not comment
upon or challenge those calculations.

6. Plaintiff and the members of the class have not suffered
any actual provable injury as a result of any failure of PHA to
comply with the Consent Decree prior to January 1, 2003.
Plaintiffs request for retroactive monetary relief is denied.

7. PHA shall not seek to recoup from plaintiff or the class
any part of the gas utility allowance overpayments that
resulted from PHA’s past use of any excessive consumption
calculations to determine gas utility allowances.

8. By consent of PHA, the requirements of paragraph 15
of the Consent Decree concerning provision of written sum-
mary reports of future utility allowance reviews are extended
until December 31, 2005.

9. The Court retains continuing jurisdiction over compli-
ance with the Consent Decree and this Order.

/s/ John P. Fullam
JOHN P. FULLAM
Fullam. S.J.

15a
APPENDIX C

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 04-2609

JACKIE MCDOWELL, et al.
Vv.

PHILADELPHIA HOUSING AUTHORITY (PHA);
JOHN WHITE; BARRY MILLER *

Jackie McDowell and the certified
class whom she represents,
Appellant.

SUR PETITION FOR REHEARING

Present: SCIRICA, Chief Judge, SLOVITER, ALITO,
ROTH, McKEE, RENDELL, BARRY, AMBRO, FUENTES,
SMITH, FISHER, and VAN ANTWERPEN, Circuit Judges,
and GARTH, Senior Circuit Judge.

The petition for rehearing filed by appellee in the above
entitled case having been submitted to the judges who
participated in the decision of this court and to all the other
available circuit judges of the circuit in regular active service,
and no judge who concurred in the decision having asked for
rehearing, and a majority of the circuit judges of the circuit in
regular active service not having voted for rehearing by the
court en banc, the petition for rehearing is denied.

* As to panel rehearing only.

l6a
By the Court,

/s/ Samuel A. Alito, Jr.
Circuit Judge

DATED: October 17, 2005

SLC/ce: Paul A. Brooks, Esq.
George D. Gould, Esq.
Stephanie L. Kosta, Esq.
Abbe F. Fletman, Esq.

17a
APPENDIX D

Subpart E—Resident Allowances For Utilities

SOURCE: 61 FR 7971, Feb. 29, 1996, unless otherwise
noted.

§ 965.501 Applicability.

(a) This subpart E applies to public housing, including the
Turnkey III Homeownership Opportunities program. This
subpart E also applies to units assisted under sections 10(c)
and 23 of the U. S. Housing Act of 1937 (42 U.S.C. 1437 et
seq.) as in effect before amendment by the Housing and
Community Development Act of 1974 (12 U.S.C. 1706e) and
to which 24 CFR part 900 is not applicable. This subpart
E does not apply to Indian housing projects (see 24 CFR
part 950).

(b) In rental units for which utilities are furnished by the
PHA but there are no checkmeters to measure the actual
utilities consumption of the individual units, residents shall be
subject to charges for consumption by resident-owned major
appliances, or for optional functions of PHA-furnished
equipment, in accordance with § 965.502(e) and 965.506(b),
but no utility allowance will be established.

§ 965.502 Establishment of utility allowances by PHAs.

(a) PHAs shall establish allowances for PHA-furnished
utilities for all checkmetered utilities and allowances for
resident-purchased utilities for all utilities purchased directly
by residents from the utilities suppliers.

(b) The PHA shall maintain a record that documents the
basis on which allowances and scheduled surcharges, and
revisions thereof, are established and revised. Such record
shall be available for inspection by residents.

(c) The PHA shall give notice to all residents of proposed
allowances, scheduled surcharges, and revisions thereof. Such

18a

notice shall be given, in the manner provided in the lease or
homebuyer agreement, not less than 60 days before the
proposed effective date of the allowances or scheduled
surcharges or revisions; shall describe with reasonable
particularity the basis for determination of the allowances,
scheduled surcharges, or revisions, including a statement of
the specific items of equipment and function whose utility
consumption requirements were included in determining the
amounts of the allowances or scheduled surcharges; shall
notify residents of the place where the PHA’s record
maintained in accordance with paragraph (b) of this section is
available for inspection; and shall provide all residents an
opportunity to submit written comments during a period
expiring not less than 30 days before the proposed effective
date of the allowances or scheduled surcharges or revisions.
Such written comments shall be retained by the PHA and
shall be available for inspection by residents.

(d) Schedules of allowances and scheduled surcharges
shall not be subject to approval by HUD before becoming
effective, but will be reviewed in the course of audits or
reviews of PHA operations.

(e) The PHA’s determinations of allowances, scheduled
surcharges, and revisions thereof shall be final and valid
unless found to be arbitrary, capricious, an abuse of dis-
cretion, or otherwise not in accordance with the law.

§ 965.503 Categories for establishment of allowances.

Separate allowances shall be established for each utility
and for each category of dwelling units determined by the
PHA to be reasonably comparable as to factors affecting
utility usage.

§ 965.504 Period for which allowances are established.

(a) PHA-furnished utilities. Allowances will normally be
established on a quarterly basis; however, residents may be

19a

surcharged ‘on a monthly basis. The allowances established
may provide for seasonal variations.

(b) Resident-purchased utilities. Monthly. allowances shall
be established. The allowances established may provide for.
seasonal variations.

§ 965.505 Standards for allowances for utilities.

(a) The objective of a PHA in designing methods of
establishing utility allowances for each dwelling unit category
and unit size shall be to approximate a reasonable con-
sumption of utilities by an energy-conservative household of
modest circumstances consistent with the requirements of a
safe, sanitary, and healthful living environment.

(b) Allowances for both PHA-furnished and _ resident-
purchased utilities shall be designed to include such rea-
sonable consumption for major equipment or for utility
functions furnished by the PHA for all residents (e.g., heating
furnace, hot water heater), for essential equipment whether or
not furnished by the PHA (e.g., range and refrigerator), and
for minor items of equipment (such as toasters and radios)
furnished by residents.

(c) The complexity and elaborateness of the methods
chosen by the PHA, in its discretion, to achieve the foregoing
objective will depend upon the nature of the housing stock,
data available to the PHA and the extent of the administrative
resources reasonably available to the PHA to be devoted to
the collection of such data, the formulation of methods of
calculation, and actual calculation and monitoring of the
allowances.

(d) In establishing allowances, the PHA shall take into
account relevant factors affecting consumption requirements,
including:

(1) The equipment and functions intended to be cov-
ered by the allowance for which the utility will be used.

20a

For instance, natural gas may be used for cooking,
heating domestic water, or space heating, or any com-
bination of the three;

(2) The climatic location of the housing projects;

(3) The size of the dwelling units and the number of
occupants per dwelling unit;

(4) Type of construction and design of the housing
project;

(5) The energy efficiency of PHA-supplied appli-
ances and equipment;

(6) The utility consumption requirements of appli-
ances and equipment whose reasonable consumption is
intended to be covered by the total resident payment;

(7) The physical condition, including insulation and
weatherization, of the housing project;

(8) Temperature levels intended to be maintained in
the unit during the day and at night, and in cold and
warm weather; and

(9) Temperature of domestic hot water.

(e) If a PHA installs air conditioning, it shall provide, to
the maximum extent economically feasible, systems that give
residents the option of choosing to use air conditioning in
their units. The design of systems that offer each resident the
option to choose air conditioning shall include retail meters or
checkmeters and residents shall pay for the energy used in its
operation. For systems that offer residents the option to
choose air conditioning, the PHA shall not include air
conditioning in the utility allowances. For systems that offer
residents the option to choose air conditioning but cannot be
checkmetered, residents are to be surcharged in accordance
with § 965.506. If an air conditioning system does not pro-
vide for resident option, residents are not to be charged, and
these systems should be avoided whenever possible.

2la

§ 965.506 Surcharges for excess consumption of PHA-
furnished utilities.

(a) For dwelling units subject to allowances for PHA-
furnished utilities where checkmeters have been installed, the
PHA shall establish surcharges for utility consumption in
excess of the allowances. Surcharges may be computed on a
straight per unit of purchase basis (e.g., cents per kilowatt
hour of electricity) or for stated blocks of excess con-
sumption, and shall be based on the PHA’s average utility
rate. The basis for calculating such surcharges shall be
described in the PHA’s schedule of allowances. Changes in
the dollar amounts of surcharges based directly on changes in
the PHA’s average utility rate shall not be subject to the
advance notice requirements of this section.

(b) For dwelling units served by PHA-furnished utilities
where checkmeters have not been installed, the PHA shall
establish schedules of surcharges indicating additional dollar
amounts residents will be required to pay by reason of
estimated utility consumption attributable to resident-owned
major appliances or to optional functions of PHA-furnished
equipment. Such surcharge schedules shall state the resident-
owned equipment (or functions of PHA-furnished equipment)
for which surcharges shall be made and the amounts of such
charges, which shall be based on the cost to the PHA of the
utility consumption estimated to be attributable to reasonable
usage of such equipment.

§ 965.507 Review and revision of allowances.

(a) Annual review. The PHA shall review at least annually
the basis on which utility allowances have been established
and, if reasonably required in order to continue adherence to
the standards stated in § 965.505, shall establish revised
allowances. The review shall include all changes in circum-
stances (including completion of modernization and/or other
energy conservation measures implemented by the PHA)

22a

indicating probability of a significant change in reasonable
consumption requirements and changes in utility rates.

(b) Revision as a result of rate changes. The PHA may
revise its allowances for resident-purchased utilities between
annual reviews if there is a rate change (including fuel
adjustments) and shall be required to do so if such change, by
itself or together with prior rate changes not adjusted for,
results in a change of 10 percent or more from the rates on
which such allowances were based. Adjustments to resident
payments as a result of such changes shall be retroactive to
the first day of the month following the month in which the
last rate change taken into account in such revision became
effective. Such rate changes shall not be subject to the 60 day
notice requirement of § 965.502(c).

§ 965.508 Individual relief.

Requests for relief from surcharges for excess consumption
of PHA-purchased utilities, or from payment of utility sup-
plier billings in excess of the allowances for resident-
purchased utilities, may be granted by the PHA on reasonable
grounds, such as special needs of elderly, ill or disabled
residents, or special factors affecting utility usage not within
the control of the resident, as the PHA shall deem appro-
priate. The PHA’s criteria for granting such relief, and
procedures for requesting such relief, shall be adopted at the
time the PHA adopts the methods and procedures for
determining utility allowances. Notice of the availability of
such procedures (including identification of the PHA
representative with whom initial contact may be made by
residents), and the PHA’s criteria for granting such relief,
shall be included in each notice to residents given in
accordance with § 965.502(c) and in the information given to
new residents upon admission.

23a
APPENDIX E

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF PENNSYLVANIA

[Filed Jan. 12, 1998]
C.A. #97-2302

JACKIE MCDOWELL, et al.
Plaintiffs,
VS.

PHILADELPHIA HOUSING AUTHORITY, ef al.
Defendants.

ORDER

AND NOW, This 12th day of January, 1997[8], this matter
having come before the Court for approval of a settlement in
this action, and for award of attorneys fees, and the Court,
having considered all papers filed and proceedings held in
connection, with said motion, having held a hearing and good
cause appearing therefore, it is hereby ORDERED:

1. This Court has jurisdiction over the subject matter of
this action and over all parties to this action; including all
members of the class as that term is defined in the Order of
this Court of May 21, 1997.

2. The Stipulation attached to this Order is incorporated
herein by reference and entered as an Order of this Court.

3. Defendants Philadelphia Housing Authority, John
White and Barry Miller and their successors shall abide by an
implement the terms in the attached Stipulation.

4. This Court hereby finds and concludes that the notice
given to the Class was the best practicable under the cir-
cumstances and fully satisfies the requirements of Rule 23 of

24a

the Federal Rules of Civil Procedure and the requirements of
due process.

5. This Court hereby awards plaintiffs’ counsel for ser-

vices performed in this litigation, attorneys fees in the amount
of $10,324.00.

6. Without affecting the finality of this judgment, the
Court hereby reserves and retains continuing jurisdiction over
all matters relating to the administration and effectuation of
the Stipulation hereby approved.

BY THE COURT:

/s/
U.S. DISTRICT COURT JUDGE

Entered: 1-12-98
Clerk of Court

25a

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF PENNSYLVANIA

C.A. #97-2302

JACKIE MCDOWELL, et al.
Plaintiffs,
VS.

PHILADELPHIA HOUSING AUTHORITY, et al.
Defendants.

STIPULATION

1. The parties have been advised of and have consented to
the terms and provisions of this stipulation.

2. The class has been certified pursuant to F.R.C.P.
23(b)(2) and the class shall consist of all Philadelphia Hous-
ing Authority (hereinafter “PHA”) tenants for whom PHA
pays or should have paid gas utility allowances since
September 1, 1996.

3. PHA shall increase all gas utility allowance payments
by an amount sufficient to reflect PGW’s current gas rate of
.712 per ccf and GCR of .16517 per ccf, which is an increase
of approximately 17%, effective October 1, 1996.

4. By October 31, 1997, PHA shall issue retroactive gas
utility allowances payments to insure that the gas utility
allowance of all class members are increased by an amount
sufficient to reflect PGW’s current gas rate of .712 per ccf
and GCR of .16517 per ccf, which is an increase of
approximately 17%, for the period of time from October 1,
1996, through March 31, 1997.

5. Where a tenant of record became head of household due
to the death or incapacity of the preceding head(s) of house-

26a

hold, PHA shall provide the relief, pursuant to paragraphs 3-5
of this stipulation, to the current head of household for the
period of time when the tenant of record was head of
household and shall also provide the same relief by paying
the tenant of record for the tenure of the preceding head(s) of
household. Under these circumstances, no payment shall be
made to the preceding head(s) of household.

6. PHA shall, commencing with 1997, review, at least
annually, the basis on which utility allowances have been
established and, if reasonably required, shall establish revised
allowances.

7. The annual review shall include all changes in cir-
cumstances indicating probability of a significant change
in reasonable consumption requirements and changes in util-
ity rates.

8. PHA may revise its allowances for resident-purchased
utilities between annual reviews if there is a rate change
except that PHA shall revise its allowances for resident-
purchased utilities between annual reviews if any change in
utility rates, by itself or together with prior rate changes not
adjusted for, results in a change of 10 percent or more from
the rates on which the allowances were based.

9. Adjustments to utility allowances shall be retroactive to
the first day of the month following the month in which the
last rate change taken into account in such revision became
effective.

10. PHA shall provide notice of this proposed settlement
by mailing the notice attached hereto as Exhibit “II” by first
class mail, postage prepaid to all class members.

11. In the event that the notice to any class member is
returned because the the class member is deceased, then
notice shall be promptly mailed to the succeeding family
member who is head of household of the unit.

27a

12. In the event that the notice to any class member is
returned because the class member has moved and left no
forwarding address, the defendants shall employ a locator
service to determine the class member’s current address and
notice to this class member shall be promptly mailed to the
class member’s current address by first class mail, postage
prepaid.

13. Named plaintiff Jackie’ McDowell shall receive the
same relief as all class members.

14. PHA shall pay Community Legal Services, Inc.
$10,324.00 in attorneys fees for the prosecution of this action.
CLS shall only be entitled to additional attorneys fees in this.
matter if the defendants fail to comply with the terms of this
stipulation and the plaintiffs prevail on a motion to enforce or
a motion for contempt.

15. For the period of time from the date of this settlement
through December 31, 2002, PHA shall provide 2 written
summary report of all future utility allowance reviews to
counsel for plaintiff within 30 days of each annual or interim
review. The report shall contain the following information:

a) The circumstances considered;

b) The relevant changes in the circumstances considered;
c) The amount of any resulting adjustment;

d) The effective date of any resulting adjustment.

16. PHA shall not be required to supply the summaries
required by paragraph 15 after December 31, 2002, unless the
plaintiffs file, prior to October 31, 2002, a motion to have the
monitoring and summaries continue. The court shall grant
such a motion if PHA has not complied with the terms of this
stipulation.

17. The parties expressly understand and agree that the
terms and conditions of this stipulation are in compromise

28a

and full accord and satisfaction of a disputed claim and that
the defendants admit no liability and settle this claim solely
for the purpose of terminating this dispute and litigation
between the parties.

18. Upon the Court’s entry of the final order approving the
settlement in this matter, PHA shall serve the notice attached
as Exhibit “III” upon all class members. Service shall be
made by first class mail, postage prepaid.

19. The court shall retain continuing jurisdiction over
compliance with this stipulation.

/s/ Michael Donahue
Michael Donahue, Esquire
George D. Gould, Esquire
Paul A. Brooks, Esquire
Community Legal Services, Inc.
1424 Chestnut Street
Phila., PA 19102
215-981-3700

Counsel for Plaintiff

/s/ Denise J. Baker
Denise J. Baker, Esquire
Crystal T. Bryant, Esquire
Phila Housing Authority
2012 Chestnut Street
Phiia., PA 10103
215-981-6127

Counsel for Defendants

29a
APPENDIX F

Philadelphia Housing Authority
Determination of Gas Utility Allowances
For Scattered-Sites

March 2003—FINAL REPORT

Submitted to: Joel M. Sweet, Esquire
Wolf, Block, Schorr and Solis-Cohen LLP
1650 Arch Street
22nd Floor
Philadelphia, PA 19103

Submitted by: /s/ Ish Sud Ph.D.
Ish Sud Ph.D., President

/s/ Elizabeth Reid McGowan
Elizabeth Reid McGowan, C.E.M.

Sud Associates, P.A.
1813 Chapel Hill Road
Durham, NC 2707
919/493-5277

30a

‘- Philadelphia Housing Authority
Determination of Gas Utility Allowances
for Scattered-sites

March 2003
I. INTRODUCTION

The objective of this study is to examine the Philadelphia
Housing Authority’s (PHA’s) existing gas utility allowances
for scattered-sites to determine if they comply with the stan-
dards set forth in 24 CFR 965.505, which requires that utility
allowances “approximate a reasonable consumption of utili-
ties by an energy-conservative household of modest circum-
stances consistent with the requirements of a safe, sanitary,
and healthful living environment”.

Further, if the existing allowances do not comply with that
regulation, we shall develop a proposal for gas utility allow-
ances consistent with HUD regulations as outlined in 24 CFR
965.505 and expanded upon in the Utility Allowance Guide-
book, a supplementary reference provided by HUD to assist
housing authorities in interpreting the HUD regulations.

II. EXISTING GAS ALLOWANCES AND ACTUAL GAS
USAGE

PHA’s scattered-site inventory includes several thousand
housing units of a variety of housing types located at various
sites throughout Philadelphia. Although the housing units are
unique, they can be categorized in terms of housing type (de-
tached, semi-detached, or inner row units), by the fuel sources
used for space heating, cooking, and domestic water heating,
and the size, by number of bedrooms. The designations are
coded as DGGG, IGGG, and SGGG, where the first character
refers to the location type (detached, inner-row, and semi-
detached, respectively), while the second through fourth char-
acters refer to the space heating fuel, the cooking fuel, and the
water heating fuels, respectively (where G=Gas, O=Oil, and

3la

E=Electricity.) The numeric suffix refers to the number of
bedrooms in the unit. Thus, a unit coded as DGGG-2 repre-
sents a two bedroom detached home with gas space heating,
water heating and cooking.

As of December 2002, PHA provided a gas utility allow-
ance to residents of 4223 scattered-site units. Table 1 shows
the distribution of these units among the various utility code
designations.

Table

0 egestas ee ag ay ge =
en 1 a ee ee cn
a OHW 12 17 7 U

inner
jooo_|gaingeatier | oe | mo yom) eo an)
8666 __ :' 4 | 9 106 | 127 | 67

inner Row, Od heat:

Heat; Gas Cocking and
SOGG OHW — hae = — bated

* All but one of these homes have received replacement
gas furnaces, and need to have the utility code des-
ignation changed to reflect gas space heating.

** All of these homes have received replacement gas
furnaces, and need to have the utility code designation
changed to reflect gas space heating.

This study is based upon analysis of a complete year of
data for all scattered-site addresses that are currently receiv-
ing a gas utility allowance from PHA and for which a full .
year of gas consumption data was available. Philadelphia Gas
Works (PGW) provided the gas consumption data in the
form of records containing fields for Unit Number, Number
of Bedrooms, Address, Apartment Number, Zip Code, Total
Annual Usage (in ccf), Total Annual Charges (in dollars), and
Average Monthly Charges (in dollars). We correlated these
records with a list of PHA units receiving gas allowances to
include identifiers for the PHA utility codes and occupancy
Status.

32a

Using just the raw PGW gas data sorted by utility code
category and normalized for weather, we compared the exist-
ing utility allowances to the actual gas consumption data
for each allowance category. This was done by multiplying
PHA’s existing monthly gas consumption allowance for each
category by 12 months per year to obtain an annual gas
consumption allowance, and then comparing it to the normal-
ized annual gas consumption for each unit. The normalized
annual consumption for each unit was determined by mul-
tiplying the total usage figure provided by PGW by a weather
normalization factor of 1.14. (The normalization process is
described in greater detail in Step 6 of Section IV of this
report.) We found that the utility allowance exceeded the nor-
malized actual gas consumption in over 96% of the scattered-
site units. |

After determining that over 96% of the scattered-site units
had allowances that exceeded their normalized annual gas
consumption, we examined the magnitude by which PHA’s
existing scattered-site gas allowances exceeded the actual ten-
ant consumption. As an initial check, we compared the dollar
value of the utility allowances paid to tenants to their actual
gas costs for the calendar year 2002. Figure 1 shows a graph
of the amount by which PHA’s scattered-site gas allowance
payments exceeded the actual gas costs. The numbers on the
left hand side show the difference between the gas allowance
payments and actual gas costs; the numbers across the bottom

_ of the chart indicate the number of household included in

each cost differential range.

33a

Figure 1
Gas Allowances Received in Excess of Actus! Gas Costs - 2002

91900-91500 pC,

«-62900 £ ” ? .

C) 2 100 160 200 zs0 co 0 400
Number of Tenants

From Figure |, it is apparent that the existing gas allow-
ance payments exceed the gas costs of the majority of the
scattered-site households. In most cases, the gas allowances
greatly exceed the actual gas costs. On average, the gas al-
lowances exceeded actual gas costs by $900 per year.

As a more exact comparison, we compared the normalized
actual gas consumption figures to the annual gas consumption
allowances provided by PHA. Figure 2 shows a graph of the
percentage of the PHA’s existing gas consumption allowance
which is actually consumed in each household. This percent-
age is based upon the normalized gas consumption, so that
the weather for the year during which data was collected has
been accounted for.

BEST AVAILABLE COPY

34a

Figure 2
Comparteon of Normaitzed Gas Consumption to Annuas Gas Nlowance

wo Oa GER AT

a feng tT

€, . + ? bs

a a

© «00 UL

me 7 sielatme

a —

1. An +! dH z wa _ |

qo ba O, Aidit | {1 7 oar .
PEEUECCECEEEGUEEEREES
CFEREEGES ECS ER EE EE ES

Percentage cf Ons Afiewrance Used

As seen in Figure 2, the vast majority of PHA’s scattered-
site households require far less gas than is provided by the
existing gas allowance. On average, the scattered-site house-
holds actually require only 55% of their gas utility consump-
tion allowance to buy gas.

Due to the large differences between the existing con-
sumption allowances and the average consumption data, we
conclude that the existing allowances do not “approximate a
reasonable consumption of utilities by an energy-conservative
household of modest circumstance” as called for by the gov-
ering standard, 24 CFR 965.505(a). Accordingly, we pro-
pose that new gas utility allowances be calculated using the
methodologies in the Utility Allowance Guidebook (Septem-
ber 1998 Edition) as described below.

Ill. DETERMINATION OF NEW GAS UTILITY ALLOW-
ANCES

HUD’s standards for determining utility allowances are
provided in 24 CFR 965.505. The Utility Allowance Guide-

35a

book is a supplementary document that provides additional
reference for housing authorities in calculating utility allow-
ances. The calculation methodologies used in this analysis
have closely followed the guidelines in the Utility Allowance
Guidebook. While the Guidebook suggests a number of per-
missible methods for meeting the requirements of 24 CFR
965, it also points out that other approaches may also be
acceptable. In a few specific situations where we have devi-
ated from the methods specifically stated in the Guidebook
(such as when there was not a statistically valid sample of
data for a pariicular category) we have used an alternative
method which is intended to be as uncomplicated as possible
while being consistent with the HUD guidelines. We aiso
made sure that any alternative methods would err on the side
of providing a more generous allowance to the residents in
that allowance category. These deviations will be explained
in more detail as they are encountered in this report.

The Utility Allowance Guidebook provides two basic meth-
odologies that may be used to determine utility allowances:
engineering-based methods and consumption-based methods.
Engineering-based methods require inputting specific details
regarding the construction of the house into a software pro-
gram to provide a building energy simulation for the building.
Since a unique building simulation is required for each differ-
ent housing type, this methodology would be prohibitively
costly and impractical to implement for developments which
include a variety of different housing plans. Consumption-
based methods use a statistical sampling of actual historical
utility data to determine appropriate utility allowances. Chap-
ter 4 of this reference includes a decision tree’ to determine
the most appropriate methodology for a Housing Authority’s
particular circumstances. Table 2 shows a summary of the
pertinent questions from the decision tree which were used to

' A copy of the decision tree is included in Appendix A.

36a

determine the most appropriate methodology for determining
the gas utility allowances for PHA’s scattered-sites.

Table 2
Decision Tree for Selecting » Utility Allowance Method
Question Answer Next Step
Do you feel the current
allowances are reasonable
based on your knowledge of The utility allowances
| the regulations? No should be recalculated.
Are the consumption data
relatively easily accessible? Yes Go to the next question
Are the consumption dala of
good quality, or can they be
improved to an acceptable Yes Go to the next question
level? .
Has the HA modernized its No.
development within the last A smal! number have Go to the next question
year? been completely
Has the HA modenazed its modernized; others have
development within the last been partially
three years? modernized. Go to the next question
Does the HA provide an
allowance for heat? Yes Go to the next question
Does the HA have on file valid
heat Joss calculations and is the
heating system efficiency No Go to the next question
known?
Not feasible due to the

Is the HA willing to hire a large number of
consultant to perform heat loss | differing types of units.

calculations and/or to It would be The use of a
determine the efficiency of the | prohibitively costly to | consumption-based
heating system? hire a consultanttodo | methodology is
the large number of recommended.
calculations needed.

Consistent with HUD’s Utility Allowance Guidebook and
in light of the varied nature of PHA’s scattered-site housing
inventory, we recommend that the gas allowances for PHA’s
scattered-sites be determined using a consumption-based
methodology

IV. CONSUMPTION METHOD FOR DETERMINING
GAS UTILITY ALLOWANCES

Chapter 6 of the HUD Utility Allowance Guidebook pro-
vides 8 steps for determining utility allowances using his-

37a

torical consumption data. We have followed these steps in
calculating the gas allowances for this report.

Step 1: Define Allowable and Non-Allowable End Uses

Step 2: Determine the Time Frame of the Historic Con-
sumption Data

Step 3: Develop the Appropriate Allowance Categories

Step 4: Collect the Consumption Data and Group Data by
Allowance Categories

Step 5: Clean Up the Consumption Data and Check the
Statistical Validity of the Sample

Step 6: Determine the Point of Central Tendency for Each
Data Set

Step 7: Establish Standards for the “Energy Conservative”
Household

Step 8: Convert Consumption Allowances to Dollar Allow-
ances

Step 1: Define Allowable and Non-Allowable End Uses

For residential gas usage, the primary end-uses of the fuel
include space heating, domestic water heating, and cooking.
Since all of these are acceptable under HUD guidelines, no
adjustments of the consumption data were required to exclude
data for non-allowable end uses. (The distinction between al-
lowable and non-allowable usages is generally more relevant
to the determination of electric allowances. )

Step 2: Determine the Time Frame of the Historic Con-
sumption Data

There are several acceptable options to define the time
period over which consumption data is studied. Two of the
most common include single-year fixed database and a three-
year rolling base of consumption data.

38a

A single-vear fixed database uses consumption data from a
single year and then normalizes the data to account for the
effects of weather during that base year. This is done by ex-
amining the published weather data for the base year (“degree
days”) and comparing the base year to the average weather
for the same area over a database of thirty years and adjusting
the usage figures accordingly. Normalizing for weather en-
sures that the particular weather patterns during the base year
(such as a particularly warm or cold winter) do not result in
under- or over-calculating the allowances based upon that
particular year’s data. This method has the advantage of not
requiring that consumption data be obtained and analyzed
each year.

The three-year rolling base looks at three years of con-
sumption data for a given number of housing units. Utility
allowances are changed every year under this scheme. Since
it examines data over time, it automatically incorporates any
changes in consumption due to aging of the housing and
equipment as well as installation of weatherization or new
equipment. Since collection of utility data can sometimes be
difficult, and this method requires that new data be collected
and new allowances be recalculated each year, many housing
authorities find this method to be costly and impractical.

The analysis used in this report is based upon a single-year
fixed database normalized for weather using consumption
data from January 2002 to December 2002.

Step 3: Develop the Appropriate Allowance Categories

Most traditional public housing developments consist of
large buildings containing multiple housing units of a similar
design and construction located at a single site, or adjacent
sites. PHA’s scattered-sites (which are the only units relevant
to PHA’s current allowance program) are different from the
traditional public housing developments in that they literally
are scattered throughout the community. Scattered-site hous-

39a

ing provides unique challenges in determining utility allow-
ances because, by their nature, scattered-sites do not have the
uniformity of design and construction types typical of tradi-
tional housing developments.

The Utility Allowance Guidebook discusses the selection of
allowance categories. On page 89, it states that “the process
of defining the allowance categories involves finding a proper
balance between the administrative burden of large numbers
of categories and the inequities which might result from
the failure to recognize appropriate factors accounting for
significantly different consumption requirements among
households.”

Further, 24 CFR 965.505(d) outlines HUD’s requirement
that Housing Authorities take into account the following
factors:

(1) The equipment and functions intended to be covered
by the allowance for which the utility will be used.
For instance, natural gas may be used for cooking,
heating domestic water, or space heating, or any
combination of the three;

(2) The climatic location of the housing projects;

(3) The size of the dwelling units and the number of
occupants per dwelling unit;

(4) Type of construction and design of the housing
project;

(5) The energy efficiency of PHA-supplied appliances
and equipment;

(6) The utility consumption requirements of appliances
and equipment whose reasonable consumption is in-
tended to be covered by the total resident payment;

(7) The physical condition, including insulation and
weatherization, of the housing project;

40a

(8) Temperature levels intended to be maintained in the
unit during the day and at night, and in cold and
warm weather; and

(9) Temperature of domestic hot water.

Below, we consider each of these factors and their rele-
vance to determining the gas utility allowances for PHA’s
scattered-sites.

(1) The equipment and functions intended to be covered by
the allowance for which the utility will be used. For instance,
natural gas may be used for cooking, heating domestic water,
or space heating, or any combination of the three.

In addition to classifying the scattered-site housing stock
by housing type (detached, semi-detached, or inner row units)
and size (number of bedrooms), PHA’s existing allowance
categories classify the housing stock by the fuel sources
used for space heating, cooking, and domestic water heating.
The designations are coded as DGGG, IGGG, and SGGG,
where the first character refers to the location type (detached,
inner-row, and semi-detached, respectively), while the second
through fourth characters refer to the space heating fuel, the
cooking fuel, and the water heating fuels, respectively (where
G=Gas, O=Oil, and E=Electricity). The numeric suffix refers
to the number of bedrooms in the unit. Thus, a unit coded as
DGGG-2 refers to a two bedroom detached home with gas
space heating, water heating and cooking.

(2) The climatic location of the housing projects

All of the PHA’s scattered-sites are located in the same
climatic location. By using normalized gas consumption data,
the climate is automatically accounted for. The degree days
for Philadelphia for the year studied, along with reference
data on standard climate conditions, are used to normalize the
data.

4la

(3) The size of the dwelling units and the number of occu-
pants per dwelling anit

PHA’s existing allowance categories are differentiated by
number of bedrooms in order to account for the size of units
and number of occupants.

(4) Type of construction and design of the housing project

PHA’s allowance categories differentiate units by whether
they are inner-row units, semi-detached units, or detached
housing units. This addresses whether the unit has relatively
little exterior wall exposure to the outdoors in proportion to
its size (inner-row units), a moderate amount (semi-de-
tached), or a large amount (detached units). Since the amount
of exterior wall exposure has a greater impact on how much
heating energy will be required than the exterior finish on a
frame wall (brick vs. stucco vs. wood siding), the distinction
between inner-row, semi-detached and detached units is given
primary importance in describing the building construction
and design.

(5) The energy efficiency of PHA-supplied appliances and
equipment

PHA has replaced existing heating systems with new gas
furnaces in a number of units. In order to determine if the
replacement of furnaces alone resulted in consistently lower
energy usage, we compared the energy consumption from
471 inner-row scattered-site units that had received new fur-
naces within the past 5 years with the usage of 1726 inner-
row units that had not. We found that the installation of new
furnaces was not a consistent indicator of lower energy usage.
Consequently, we feel that it is not worthwhile to differentiate
separate utility allowance categories based on this criterion.

(6) The utility consumption requirements of appliances and
equipment whose reasonable consumption is intended to be
covered by the total resident payment

42a

For residential gas usage, the primary end-uses of the fuel
include space heating, domestic water heating, and cooking.
Since all of these are acceptable under HUD guidelines, no
adjustments of the consumption data were required to exclude
data for non-allowable end uses. (The distinction between al-
lowable and non-allowable usages is generally more relevant
to the determination of electric allowances, where items like
toasters and hair dryers need to be included in engineering-
based simulations, but items such as air-conditioning should
be excluded.)

(7) The physical condition, including insulation and weath-
erization, of the housing project

Due to the non-uniform nature of PHA’s scattered-sites,
the physical condition of the units vary considerably with
respect to insulation and weatherization. PHA has completely
modernized approximately 500-600 units. The effect of mod-
ernization on the energy usage was examined by comparing
the average energy usage of 159 modernized inner-row
houses with 2034 non-modernized inner-row houses. While
modernization generally decreased the gas consumption of
the homes, due to small percentage (<10%) of homes which
have currently undergone modernization, the inclusion of
these homes in the overall utility allowance calculations was
not found to have a significant effect on the overall allowance
recommendations. Because there is currently not a large
enough group of completely modernized homes to provide
statistically valid sample sizes to determine gas allowances
for modernized detached or semi-detached housing, and due
to the extra administrative burden that administering extra
allowance categories would impose, we would not recom-
mend creating separate allowance categories based upon physi-
cal condition of the building at this time. As more houses are
modernized, however, we recommend that PHA consider
establishing separate allowance categories for modernized vs.
non-modernized housing.

43a

(8) Temperature levels intended to be maintained in the unit
during the day and at night, and in cold and warm weather;
and

(9) Temperature of domestic hot water

Specifying temperature levels is generally more relevant to
engineering-based building simulations. In consumption analy-
ses, improperly high temperature settings will show up as
higher than normal usage.

In summary, HUD recommends that Housing Authorities
establish separate categories of utility allowances for different
dwelling sizes (in terms of number of bedrooms). It further
recommends that separate allowance categories be established
for the dwelling unit’s location within a building, to account
for the fact that housing units which have other heated dwell-
ings adjacent to them have lower heating requirements than
detached housing, whose walls are adjacent to unheated out-
door air. PHA’s current allowance categories, which take into
account unit size and location in addition to type of utilities
used, meet HUD’s criteria for an adequate number of allow-
ance categories.

Step 4: Collect the Consumption Data and Group Data by
Allowance Categories

As the initial step in this analysis, we requested utility
consumption for all of the scattered-sites from the gas utility,
Philadelphia Gas Works (PGW.) PGW provided this data in
an electronic format. Each consumption record from PGW
contained fields for Unit Number, Number of Bedrooms’,
Address, Apartment Number, Zip Code, Total Annual Usage
(in ccf), Total Annual Charges (in dollars), and Average

* The fields for unit number and number of bedrooms are not part of
the PGW record-keeping system. This information was “tied to” the ad-
dresses which were sent to PGW when gas consumption information was
requested, and was returned with the consumption information.

44a

Monthly Charges (in dollars). We correlated these records
with a list of PHA units receiving gas allowances to include
identifiers for PHA’s utility codes and occupancy status. The
utility codes are used as the allowance category identifier.

Step 5: Clean Up the Consumption Data and Check the
Statistical Validity of the Sample

As we correlated the gas bills with the list of scattered-site
addresses, we also cleaned up the data. Not all of the gas-
heated scattered-site units were occupied during the base year
during which consumption data was collected. Since PHA
maintains a designation code denoting whether a unit is occu-
pied, vacant, or undergoing renovation, only data from units
which were designated as being occupied were included in
the analysis dataset.

PGW informed us that any records that they sent to us
which showed a consumption of zero denoted an address for
which they had fewer than 10 months of utility data available
during the sample period of January 1, 2002-December 31,
2002. This applied to 282 units. In addition, by comparing the
average monthly gas cost to the annual gas cost, we were able
to determine that a number of the gas records were based
upon either 11, 13, or 14 bills rather than the expected 12 bills
per year. Since the data examined was based upon the calen-
dar year, it was likely that either a missed or additional bill
during the period might involve the normally high gas-usage
months of December or January. Consequently, we chose to
exclude the 155 records which were not based upon 12 gas
bills.

There were 12 gas consumption records which had utility
code designations which identified them as oil heated
homes.’ During the course of this investigation, we learned

>There were an additional 4 homes with oil heating utility code
designations, but they were included among the records for which PGW
bills were not available.

45a

that all but one of the 16 units with oil-heating utility code
designations units had been converted to gas space heating,
and were thus improperly coded. These records were
excluded from the statistical analysis. In addition, there were
73 addresses which we were unable to match with PGW gas
bills by the time this analysis was done.

The cleanup of data resulted in a total of 3,701 records,
distributed as shown in Table 3.

Tae 3
sear of Data Patan ~ AS ora Satan Retanase Calapan
| Colegory _ Description aR __29R_ 82 _4BR s8F _$8h_
DGGG end DHW 2 12) 22 | § §
Lnner-+ow, Gas Neal, cooking, }
GSB OHw ‘8 324_| 1677 | 374 146
Semi-detached: Gas nest. |
$660 __| cooking, eng DHW a | 7} 2 | 160 | 181 |

Although there were a large number of bills available, this
did not result in a large sample size of data in every allow-
ance category. In some cases, the small sample size indicates
that the statistical validity of any results involving the data
would be questionable. In most cases, the small sample size is
primarily the result of an allowance category which had very
few members in it. Table 4 shows a side-by-side comparison
of the number of gas data points available in each category
and the number of occupied homes in the categories.

Table 4
Naander cf Date ee aa = sin
Qyeg pron LBR rae al 2. BR 4 BR
0GGG 2¢3 | 12/32 22 42/17 e/7_ 3 67
inner-row, Gas
hest, cootung,
IGGG | andOHW __|. 19/29 | 324/390 | 1677/1 374/434 j 106 / 157
Semi-detached,
——
SGGG_ | OrHw 4/4 77/90 312/ 150 / 168 | 111/12? | 63/67

The standard for statistical validity suggested by HUD is
that there be a 95% probability that the average of the sample

|
|
|
|

46a

is within 10% of the average for the entire population. The
formula used to determine the resulting valid sample size‘ is:

valid sample size=(3.84* Variance)/(0.1 * Sample Average)”

The numbers which are shown as shaded in Table 4 repre-
sent allowance categories for which there was not a statisti-
cally valid sample size of data available for the category.
Although the number of shaded boxes in the table gives the
impression that this affects a large proportion of the allow-
ance categories, the total number of homes included is only
64, or 1.5% of the scattered-site homes receiving utility al-
lowances.

The reader may wonder why we considered 12 units to be a
valid sample size for the DGGG-2 category, but we consid-
ered 12 units to be inadequate for DGGG-4, and 19 units
inadequate for IGGG-1. This is based upon the variability of
the data within each dataset. There was significantly less
variation among the records in the DGGG-2 category than
there was in either DGGG-4 or IGGG-1.

We made additional checks to ascertain that the data used
was reasonable. The Utility Allowance Guidebook notes that
there may be a variety of causes which may cause excessive
variability in the dataset, and suggests that it is appropriate to
drop the top and bottom 10% of all readings in order to
reduce the variability of the sample to increase its statistical
validity. This can help ensure that unusually high or low data
points are not allowed to skew the results for the entire sam-
ple. Where the existing sample of raw data was high enough
to allow this, the top and bottom 10% of data points were
dropped from the dataset. Where the existing sample size was
already unusually small, this was not done. The resulting
number of data points which were available for analysis is
shown in Table 5.

* Utility Allowance Guidebook, at page 96.

Tatte $
Number of Osis Points Used In Calculations
——— 1OR_ 20R 38 48 __S8R _GOR
Detached, Gas heat, cooking,
| OGGG * and OHW on 19 6 | 12 8 é
PPP |= A PPP
Semi-delached; Ges hest,
LSGGG _| sogking, and DHW = L249 jt 89 | __$!

* Unless noted otherwise, all numbers reflect dropping top
and bottom 10% of values in dataset to improve
variability of data

** Due to small amount of data available, all source data
was used in 4, 5, and 6 bedroom categories.

*** There was inadequate data available to determine one
bedroom usages with statistical validity.

Values shown for one bedroom allowances in following
tables are based upon two bedroom usage.

There was inadequate data available to ensure statistical
validity of the results for any of the one bedroom units re-
gardless of housing type. According to the Utility Allowance
Guidebook, if there is not enough data available to provide a
statistically valid sample size, and additional data is not avail-
able, the housing authority should consider combining similar
allowance categories. For this analysis, we chose to use the
two bedroom values for the one bedroom allowances as well.
This is a slightly more liberal substitution than combining the
two categories. This method was chosen to make sure that the
use of one-bedroom data in a combined-category calculation
would not decrease the value of the allowance that would be
given to two bedroom residents. Instead, it will overestimate
the value of the one-bedroom categories. As an alternative,
PHA could consider using determining the one bedroom al-
lowances by calculating them as a proportionate fraction of
the usage from a different size unit. Based upon the meth-
odologies used in HUD-52667 (the HUD worksheet for deter

48a

mining Section 8 allowances) one bedroom allowances could
be estimated by multiplying the two-bedroom usage by 0.78.

Because there is only one oil-heated home (in category
1OGG-3), there was not a meaningful sample size for analy-
sis. Since this category includes only one home, PHA may
wish to consider paying this gas bill directly to avoid the
administrative burden of determining an allowance level for a
single home. Alternatively, this unit could be given an allow-
ance equal to a similar sized gas heated home.

The sample sizes for most of the detached housing units
(with the exception of the two and three bedroom units) re-
main too small to ensure statistical validity, due primarily
to the small populations in the utility allowance categories.
Lacking additional data for detached housing units, these
numbers were used.

Table 6 shows the average annual consumption levels
which were used as the basis for this analysis.

ES na
weno isa 288 388 468 SOR GBR
cog" |oungensorw | 1100 | soo | s1600 | soos2 | aves | aes |
999 cess od 1M s_ | ov sges.e | reoz2 | zoe, |
jsoag [ore] ony | ons | arene | czar | rere | sons

* Unless noted otherwise, all numbers reflect dropping top
and bottom 10% of values in dataset to improve
variability of data.

** Due to small amount of data available, all source data
was used in 4, 5, and 6 bedroom categories.

*** There was inadequate data available to determine one
bedroom usages with statistical validity.

Values shown for one bedroom allowances in following
tables are based upon two bedroom usage.

49a

Step 6: Determine the Point of Central Tendency for each
Data Set

Once the statistically valid dataset for each allowance cate-
gory has been determined, the next step is to determine the
“typical” consumption for the category. This is referred to as
the point of central tendency. This point can be defined by
either the mean or the median of the daia, at the discretion of
the housing authority. For this analysis, the average (mean)
was used.

When the median is used to determine the point of central
tendency, the value of a single piece of data is used to char-
acterize the entire group. If data is added to or removed from
the dataset, the median will then shift to the value of a dif-
ferent discrete piece of data. Since there can be significant
variation between adjacent points in the dataset, this can
result in a significant shift in the median value based upon the
addition or removal of a single data point. When the average
is used, however, the effect of adding or removing data points
is generally a smoother transition, because the variation in
value is tempered out among all the data points. We prefer to
use the average because it considers the value of every data
point within the dataset rather than relying on one single
value, making it a less volatile indicator than the median.

Since this analysis was based upon consumption data from
a single year, we normalized the data for the effects of weather.
Various organizations, including the National Oceanic and
Atmospheric Administration, keep track of weather statistics
over time. One such statistic is the Heating Degree Days
(HDD), which is a rough indicator of how much heating is
required. By multiplying the consumption data for a particu-
lar year by the ratio of the 30-year average HDD divided by
the HDD for the particular year, the consumption data can be
normalized to a typical year’s energy use.

50a

The 30-year average HDD for Philadelphia from 1941 to
1970, as tabulated in Appendix C of the Utility Allowance
Guidebook, totaled 4865 degree days. The monthly heating
degree days for the period January 2002 to December 2002
were obtained from the archives section of a NOAA website
(at http://www.cpc.ncep.noaa.gov/products/analysis_monitor
ing/cdus/degree_days/) and were found to total 4264 degree
days. This showed that the year during which data was col-
lected was milder than is typical for Philadelphia. To adjust —
for this, the usage data was multiplied by a normalization
factor of 4865/4264, or 1.14.

The average gas consumption values, normalized and con-
verted into monthly figures (by dividing by 12 months per
year) are shown in Table 7.

Table 7
Average Monthly Ges Consumption, ocf, Normafized for Weather

| Category __ Onacrigtion 18h _ _29R__s88 son 8 8R_)
Oeteched; Gas heat,

D0GGG | cou xing, and DH 105.5 | 1058 | 1106 | 161 | 2083 | 2323 |
inner-+ow,

IGGG no. and OHM 77 77.3 '] 116.1 | 182.2 | 1918
Sern-detached, Gas heat,

SGGG and OHW 86.7 ab! 108.4 | 1223 | 1660 | 1816

Step 7: Establish Standards for the “Energy Conservative
Household”

According to CFR 965.505(a), “The objective of a PHA in
designing methods of establishing utility allowances for each
dwelling unit category and unit size shall be to approximate a
reasonable consumption of utilities by an energy-conservative
household of modest circumstances consistent with the re-
quirements of a safe, sanitary, and healthful living environ-
ment.”

The figures shown in Table 7 represent the average gas
consumption by PHA scattered-site tenants for each allow-
ance category. These numbers are strictly averages. Exceed-
ing the average figure does not necessarily imply that the oc-
cupants are being wasteful. Consequently, the housing au-

S5la

thority must decide at what level of consumption the level
changes from energy-conservative to wasteful.

The Utility Allowance Guidebook suggests three methods
that may be used to set the standards for an energy conserva-
tive household:

1. Statistical Method: This method would statistically
ensure that the consumption of most resident house-
holds would fall within the allowance standards by
setting the consumption allowance equal to the mean
plus one standard deviation.

2. Percentile Method: Rather than using the mean which
was determined earlier, this method would divide all
of the consumption data for a given allowance cate-
gory into percentiles. A threshold level (e.g., the 85th
percentile) would be selected, and the allowance would
be set based upon the usage level at that percentile.

3. Multiplier Method: The Housing Authority can set a
fixed percentage above the average which it considers
within the acceptable guidelines for an energy con-
servative household, and apply it to the average. (e.g.,
if the Housing Authority considers usage levels within
10% of average to be acceptable, then the consump-
tion allowance should be set at 1.10 times the average
usage for the allowance category.) In the course of
this analysis, we will refer to this multiplier as the
“Energy Conservative Household Coefficient,” or
ECHC.

We chose to use the multiplier method analysis, as it has
several advantages over the statistical and percentile methods.
These include:

e Simplicity. Applying a multiplier to the point of
central tendency is the simplest method.

52a

e Difficulty in communicating results from the sta-
tistical method: From the analyst’s standpoint, the
statistical method is a simple method to apply.
However, the concept of standard deviation is gen-
erally not well understood among laypeople. Since
communication of results with tenants is important,
this method was considered less desirable.

e Volatility of characterizing a dataset by the value of
a single data point in the percentile method: This
situation is similar to that of the choosing whether
to use the average or the median to characterize
each dataset. Like the median, the percentile method
is based upon using the value of a single reading to
characterize an entire allowance category. We feel
that this places too much importance upon one data
point, particularly when some datasets are relatively
small and there can be sizeable differences between
data point values.

e Flexibility. Because of the ease of application, is it
simple to apply a multiplier across the board to the
average values and compare the resulting allowable
usages to the measured usages. In this way, it is
possible to select a multiplier value which results in
a desired level of residents at or below the allow-
able usage for most allowance categories.

In using the »sultiplier method for this analysis, the accept-
able gas conswenption level is determined by multiplying the
average consumption for a particular household type by the
Energy Conservative Household Coefficient (ECHC). For
example, if usage up to 15% above the average usage is to
be considered allowable, this coefficient should be 1.15. It is
up to the housing authority to select an Energy Conservative
Household Coefficient (ECHC) to determine the level of
energy usage they find acceptable. The Utility Allowance
Guidebook does not prescribe a fixed level that it considers as

53a

an appropriate percentage of homes that would be considered
as using an excessive amount of energy and would conse-
quently receive an allowance level below their actual con-
sumption level. It explicitly states that this decision is strictly
left up to the Housing Authority.

Table 8 shows the acceptable monthly usage levels, nor-
malized for weather, using an ECHC value of 1.15. This
ECHC value means that the allowances would be based upon
115% of the average normalized gas consumption from homes
in each allowance category.

Table 6
Acuaptable Monthty Gas Consumption, acf Normeitred for Weather
Energy Conservative Household Cosfliciet © 115
Category _ Description 10R.__26R 2m 4 SBR _ _@6R
Detached; Gas nest,
OGGG cooking, and OHW 129.3 | 121 127.2 | 1852 | 239.5 | 267.1
Inner: 4
1iGGG mp . 88.9 106.6 1398 | 1760 | 2206
Semi-detached, Ges Nest,
$6G6G cooking, and OHW 09.7 997 124.7 | 1406 | 1909 | 208.8

As a point of reference, we compared the acceptable
monthly gas consumption values (using an ECHC of 1.15) of
Table 8 to PHA’s existing scattered-site gas consumption al-
lowances. PHA’s current scattered-site gas allowances are
shown in Table 9.

The percentage differences between the proposed accept-
able consumption levels (with ECHC = 1.15) and the existing
gas utility allowances are shown in Table 10. A positive per-
centage change indicates that the recommended allowance
exceeds PHA’s existing consumption allowance.

54a

Table 10
Percuntage Crange in Recommended va. Existing Allowances
Energy Conservstive Househoid Coeffictent = 1.15

Dencription 18R_ _20R 3$B8R 48R 68R 68K
Detached, Gas heat,
10666 ___| cooking, and DHW 42% | -23.4% 1% | -33.8% | -19.4% | -21.0% |

inner-row, Gas heat,

1GGG cookang. gr OMW_}_42.8% 44.4% | 37.8% | -40.2% | -36.8% | -30.5% |
Semi-delacned; ’
heat, cooking, end

[$399 _| DKW 308% | 45.2% | 40.9% | -43.8% | 34.1% | 36.7%

Table 10 indicates that the proposed acceptable consump-
tion allowances based upon and ECHC of 1.15 (shown in
Table 8) are lower than PHA’s existing scattered-site gas
consumption allowances.

Is the difference in the proposed allowance levels and .
PHA’s existing gas allowances a cause for concern? Does the
fact that these proposed allowances are lower tlian the exist-
ing allowances imply that they were too restrictive? We
examined these questions by comparing the proposed allow-
ances to other benchmarks.

Since this analysis is based upon a consumption-based
methodology, the results can inherently be expected to be
more generous to the tenants than the results of a similar en-
gineering-based methodology. The Utility Allowance Guide-
book states that “by focusing on actual resident utility con-
sumption rather than on recommended standards for utility
use, the consumption methodology also tends to give less em-
phasis on energy conservation. In other words, if there is a
trade-off between minimizing resident utility surcharges and
maximizing energy conservation by residents, the consump-
tion methodology will tend to favor the former over the
latter.”

Within the framework of the consumption-based methodol-
ogy, we chose to apply a multiplier to the point of central
tendency in order to determine the standards for the energy
conservative household. An alternative method that HUD rec-
ommends is the statistical method, which defines the stan-
dards for the energy conservative household as equal to the

5Sa

mean plus one standard deviation. For comparison purposes,
we calculated those figures as well. Table 11 shows the val-
ues for the mean plus one standard deviation for each allow-
ance category.

‘BR zen 99h =.=
a ~ oa

or 057 | sos? | sree | iz | gare | arse |
00 _| ogni ent OF mo | oso | gos | s270 | 1050 | amps |
|scq | scour eoww | gos | os | sro | vase | vars | 2042 |

The percentage differences are shown in Table 12. A posi-
tive percent difference indicates that the acceptable consump-
tion level from Table 8 (using an ECHC of 1.15) exceeds the
one calculated using the statistical method of using the mean
plus one standard deviation.

ae as, ae Maan Plus Stancard Devaation
| Caegery _Descripton_ 18R 28h 38f 48R 568A 68R
Detached: Gas nest
OGGG 129% | 12.9% | 82%) 6.6% |< 9% | 3.9% |
inner sow, Ges host,
Semi-detached, Gav heat.
LSG6G__| cooking, and OHV 98% | 49% | 3.5% | 50% | 22% |

Table 12 indicates that with the exception of the 6 bedroom
detached units, the proposed acceptable consumption levels
calculated using an ECHC of 1.15 are higher than those cal-
culated by the alternate statistical method suggested by HUD.
This suggests that the use of the ECHC multiplier of 1.15 was
appropriate, «ind generous by HUD standards.

As an additional check to determine whether the acceptable
usage levels shown in Table 8 were reasonable, we compared
the acceptable consumption levels in Table 8 to the actual gas
consumption figures. The acceptable consumption levels in
Table 8 exceeded the actual consumption of 81% of the scat-
tered-site homes during 2002. When the actual consumption
data was normalized to account for weather, we found that

56a

the acceptable consumption levels of Table 8 exceeded the
normalized consumption of 69% of the scattered-site homes.

Step 8: Convert Consumption Allowances to Dollar Allow-
ances

The conversion of the acceptable gas consumption allow-
ances to gas cost allowances is done by applying the current
utility cost rates to the consumption. As of December 2002,
the combined PGW residential gas rate is $1.10701/ccf with
a customer charge of $12.00 per month. Table 13 shows the
dollar utility allowances, rounded to the nearest dollar, based
upon the acceptable usage levels shown in Table 8. Like
Table 8, the allowances shown here are based upon 115% of
the average usage for the category, determined by the applica-
tion of the energy conservative household coefficient of 1.15.

Tatts 13
Acceptable Morth!y Usage Cost, $. Normaitred fry Weather
Energy Corsenative Household Coefficient © 1 15
18R_ _286R 38R 48R S6R_ ESR
| Oetached: Gas heat, cooking,
poss and CHW $146 | $217_ | $277 | $308
inner-row, Gas heat, cooking.
GGG _ and OHW $110 _} $110 u $182 | S208 | $256 |
Semi-detached; Ges heat,
[8660 __| cooking, eno Ob:ws $i22_|_siza_|_srso | $163 | gzz9_ | $249 |

V. RECOMMENDATIONS

Based upon comparisons of PHA’s existing gas allowances
with average consumption data (normalized for weather ef-
fects), we conclude that PHA’s existing scattered-site gas
allowances do not “approximate a reasonable consumption of
utilities by an energy-conservative household of modest cir-
cumstance” as called for by the gove*ning standard, 24 CFR
965.505(a). We recommend that PHA update its gas con-
surnption allowances for scattered sites.

Table 14 shows the recommended monthly gas consump-
tion allowances for scattered-sites in ccf. These values are
based upon the normalized average gas consumption levels
with an Energy Conservative Household Coefficient of 1.15,

57a

as explained above. (This table contains the same information
shown in Table 8. It is repeated here for convenience.)

Tate 14 :
Acceptable Monthty Ges Consumpuon. oct, Normalized for Weether
Energy Conservetre Household Coefficient = 1.15

1BR 2 3 BR a 8R 6
a Pas pO, BARRA SR BG
|DGGG_ __| cooking, end Oriw_ 121.3 | 125.3 1.1272 1962 | 2305 | 267.1
11969 __| cooking, and OW 869 | 669 | 1088 | 1388) 1750

[3069 ___| poking, eng Ort gor | so7_| 1247 | 1496 | 1909 | 2000 |

These allowances were determined by a sound, relatively
simple method based upon HUD standards as outlined in 24
CFR 965.505 with further interpretative guidelines provided
by the September 1998 Utility Allowance Guidebook. Where
our methods deviated from those specifically outlined within
the Guidebook, we selected alternative methods which were
simple, within the spirit of the HUD guidelines, and intended
to err on the side of generosity toward the PHA tenants.

These allowances were calculated using a consumption-
based methodology, which HUD recognizes as a meth-
odology which tends to provide more generous utility allow-
ances. As demonstrated within the report, the multiplier-
based consumption methodology we chose resulted in allow-
ances which were more generous than those from the alterna-
tive statistical method. Although these allowance levels are
lower than PHA’s existing scattered-site gas allowances, we
feel that they are reasonable, but generous.

The corresponding cost allowances, based upon PGW rates
as of December 2002, are shown above in Table 13. HUD
regulations require periodic review of utility allowances to
examine changes in utility rate schedules and requires revi-
sion when a rate change results in a change of 10% or more
from the rates which were previously used to determine util-
ity allowances. When the recommended monthly gas con-

* Utility Allowance Guidebook, at page 83.

58a

sumption allowances have been approved, we will provide a
copy of these allowances in a spreadsheet format to allow for
ease of rate comparison and updating.

59a
APPENDIX A

Decision Tree for Selecting a Utility Allowance Method

Exhibit 4.1
Decision Tree for Selecting a Utility Allowar.» Method

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6la
APPENDIX G

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF PENNSYLVANIA

C.A. #97-2302

JACKIE MCDOWELL, et al.,
Plaintiffs,
Ve

PHILADELPHIA HOUSING AUTHORITY, et al.,
Defendants.

MEMORANDUM OF THE PHILADELPHIA
HOUSING AUTHORITY TO CORRECT
STATEMENT IN PRIOR BRIEF

On March 7, 2003, The Philadelphia Housing Authority
(“PHA”) filed its sur-reply to Plaintiffs’ Motion to Compel
Compliance and for Sanctions. In its brief, PHA identified
steps it had already taken to comply with the Court’s 1998
Consent Decree. As to gas rate changes of 10 percent or more
and customer charge increases made by the gas company
after the 1998 Consent Decree, PHA also committed to make
the members of the class whole for any provable loss
resulting from not including those changes in its gas utility
allowances.

PHA also demonstrated through the report of its expert,
Sud Associates, Inc., that the consumption calculation PHA
used during the relevant period greatly exceeded the class
members’ actual gas consumption during that time.’ PHA

' In March 2003, PHA providgd notice to residents and their counsel in
this case explaining that PHA woulg prospectively apply Sud Associates’
proposes revised gas consumption allowances, effective June 1, 2003.
The “mz amd comment period required by regulations of the United

62a

therefore proposed that it would recalculate gas utility
allowances for PHA scattered-site residents for the entire
period since the Consent Decree using adjusted gas rates in
accordance with the Consent Decree, accounting for the gas
company’s increased customer charge, and applying PHA’s
proposed revised consumption calculations, which are based
upon a report by Sud Associates. PHA further stated that on
that basis:

If the Court rules that PHA may provide retroactive
utility allowance adjustments based upon Sud Asso-
ciates’s findings, PHA would pay more than $2.8 mil-
lion to class member in retroactive utility allowance
adjustments, even though 96 percent of PHA residents
already receive gas allowances in excess of their actual
gas costs.

PHA’s Sur-reply at p. 20.

On May 22, 2003, Sud Associates informed PHA of an
error in its calculations, and that the amount class members
would be due if PHA used the gas company’s adjusted rates
and customer charges, and the revised consumption allow-
ances determined by Sud Associates, is not $2.8 million. In a
Declaration dated May 30, 2003, which is attached, Dr. Ish
Sud, president of Sud Associates, explained that Sud Asso-
ciates had attempted to calculate the amount actually paid by
PHA for gas utility allowances by establishing the gas
consumption and cost factors that PHA had used since July
1999 and then calculating how much PHA “would have paid
in gas utility allowances had PHA: (a) adjusted gas rates in
accordance with the Consent Decree; (b) accounted for the
gas company’s increased customer charge; and (c) retro
actively applied our proposed revised consumption allow-
ances starting in July 1999 (the first time after the Consent

States Department of Housing and Urban Development has elapsed
without objection or comment from residents or plaintiffs’ counsel.

63a

Decree that gas rates changed by 10 percent or more).”
Declaration of Ish Sud, P.E. (“Sud Decl.”) at ¥ 4. Dr. Sud
explained that:

In calculating the amount PHA actually paid, we mis-
takenly used our proposed revised consumption calcu-
lations raiher than the actual consumption calculations
used by PHA during the relevant time period. As a
result, we understated by $12,301,134 the amount PHA
actually paid to residents in gas utility allowances. After
confirming our error, | immediately contacted PHA’s
counsel to advise them of this fact.

Sud Decl. at 5.

Dr. Sud corrected the error by recalculating the amount
PHA actually paid in gas utility allowances during the
relevant period and determined that the correct amount is
$32,806,662. Sud Decl. at § 6. The amount PHA would have
paid residents in gas utility allowances had it used the as-
sumptions stated above is $23,322,625. Jd. Dr. Sud con-
cluded: “As a result of not using those assumptions, therefore,
PHA overpaid residents for gas utility allowances in the
amount of $9,484,037.” Jd.

In summary, according to Dr. Sud, if PHA were to
recalculate gas utility allowances for the time period July 1,
1999 to December 31, 2002, using gas rates adjusted pursuant
to the Consent Decree, accounting for the gas company’s
increased customer charge, and applying the revised con-
sumption calculations proposed by Sud Associates, PHA
would not owe residents any money for gas utility allow-
ances. On the contrary, PHA overpaid scattered-site residents
by $9,484,037.

Sud Associates’ error emphasizes the fact that PHA resi-
dents have not suffered any provable injury as a result of
PHA’s alleged failure to comply with the Consent Decree.
Just the opposite is true—residents received a huge windfall

64a

over the last five years as a result of PHA’s use of historically
overly generous consumption calculations. Any further pay-
ments to residents are not warranted and would be incon-
sistent with the Brooke Amendment to the Housing Act, in
which Congress legislated that public housing residents “shall
pay as rent . . . 30 per centum of the family’s monthly
adjusted income.” 42 U.S.C. § 1437a(1)(A). As described in
PHA’s surreply brief, the United States Supreme Court has
explained that the Brooke Amendment is a two-way street—
just as rent cannot be more than 30 percent of adjusted
income, it cannot be less:

The Brooke Amendment could not be clearer: as further
amended in 1981, tenants could be charged as rent no
‘more and no less than 30 percent of their income. This
was a mandatory limitation on the individual family and
‘its income.

Wright v. City of Roanoke Redevelopment and Housing
Authority, 479 U.S. 418, 430, 107 S.Ct. 766, 773-74 (1987)
(emphasis added).

Given the fact that, for virtually all PHA residents who
receive gas allowances, the amount they received from PHA
in gas allowances far exceeded the amount they paid for gas,
residents have long been paying rent in an amount less than
30 percent of their adjusted income. For PHA now to pay
residents more money in the guise of gas allowances would
reduce even further below 30 percent the percentage of
adjusted gross income residents have paid PHA for rent,
contrary to the Brooke Amendment as interpreted by the
United States Supreme Court.

65a
By: /s/
Alan C. Kessler
Judah I. Labovitz
Joel M. Sweet
Stephanie L. Kosta

Attorneys for Defendant,
The Philadelphia Housing Authority

OF COUNSEL:

WOLF, BLOCK, SCHORR AND
SOLIS-COHEN LLP

1650 Arch Street

22nd Floor

Philadelphia, PA 19103

Dated: June 9, 2003

‘ 66a

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF PENNSYLVANIA

C.A. #97-2352

JACKIE MCDOWELL, et al.,
Plaintiffs,
Vv.

PHILADELPHIA HOUSING AUTHORITY, et al.,
Defendants.

DECLARATION OF ISH SUD, PH_D., P.E.

1. I am the President of Sud Associates, P.A. My cur-
riculum vitae is attached hereto as Exhibit A.

2. The Philadelphia Housing Authority, through its coun-
sel, Wolf, Block, Schorr and Solis-Cohen LLP, retained Sud
Associates to serve as a consultant in this litigation. In that
capacity, Sud Associates performed several individual assign-
ments for PHA.

3. The principal assignment was an analysis of gas
consumption by residents of PHA scattered-site housing and,
based upon that analysis, the development of recommen-
dations in accordance with guidelines issued by the United
States Department of Housing and Urban Development
(“HUD”) for revisions to PHA’s gas utility allowances. Our
analysis and recommendations are reflected in our report
dated March 2003, which PHA submitted to the Court as
Exhibit B to its Sur-Reply of Defendant The Philadelphia
Housing Authority in Opposition to Motion to Compel
Compliance And for Sanctions.

4. Another assignment Sud Associates performed for PHA
was a computation of the amount PHA may have underpaid
or overpaid in utility allowances as a result of PHA’s alleged

67a

failure to comply in a timely manner with all aspects of the
Consent Decree. To do this, we established the gas con-
sumption and cost factors that PHA had used since July 1999
to determine its gas utility allowances, in an attempt to
calculate the amount actually paid by PHA foe” gas utility
allowances. We then calculated how much PHA would have
paid in gas utility allowances had PHA: (a) adjusted gas rates
in accordance with the Consent Decree; (b) accounted for the
gas company’s increased customer charge; and (c) retro-
actively applied our proposed revised consumption allow-
ances starting in July 1999 (the first time after the Consent
Decree that gas rates changed by 10 percent or more). We
concluded that, had PHA used the adjusted gas rates, the
increased customer charge, and the revised consumption
calculations, PHA would have paid $2,823,097 more than it
actually had paid in utility allowances during the time period
July 1, 1999 to December 31, 2002.

5. On May 22, 2003, I discovered that what we had
informed PHA was wrong. In calculating the amount PHA
actually paid, we mistakenly used our proposed revised
consumption calculations rather than the actual consumption
calculations used by PHA during the relevant time period. As
a result, we understated by $12,307,134 the amount PHA
actually paid to residents in gas utility allowances. After
confirming our error, I immediately contacted PHA’s counsel
to advise them of this fact.

6. We have now corrected our error by calculating the
amount PHA actually paid in gas utility allowances during
the relevant period. That amount is $32,806,662. The amount
PHA would have paid residents in gas utility allowances had
it used the assumptions stated above is $23,322,625. As a
result of not using those assumptions, therefore, PHA
overpaid residents for gas utility allowances in the amount of
$9,484,037.

68a

7. The revised calculations were prepared by my colleague
Elizabeth McGowan, C.E.M., in a spreadsheet. Both I and
another colleague, Jessica Mandujano, Data Analyst, have
independently reviewed and confirmed the accuracy of the
design of the spreadsheet and the data used in the spread-
sheet. We also have conducted spot checks of the calculations
reflected in the spreadsheet. Additionally, we have compared
the difference between our initial incorrect conclusion about
the amount that PHA would have owed and the corrected
analysis, and verified that the difference would be accounted
for by the difference in the consumption allowances used in
the original calculation and the corrected analysis.

8. The determination of the amount that PHA would have
underpaid or overpaid during the period July 1, 1999 to
December 2002, was performed independently and has no
bearing upon our March 2003 study to determine appropriate
gas consumption calculations pursuant to HUD’s guidelines.

I declare under penalty of perjury that the foregoing is true
and correct.

Date: May 30, 2003

/s/ Ish Sud
Ish Sud, Ph.D., P.E.

69a

ISH SUD
President

Born
October 6, 1949 in Calcutta, India

Education

Ph.D./Mechanical Engineering, Duke University, May 1975

M.S./Mechanical Engineering, Duke University, September
1971

B.Tech./Mechanical Engineering, First Division with
Distinction, Indian Institute of Technology, Kanpur, May

1970

Professional Experience

Graduate Assistant Department of Mechanical Engineering and
Materials Science, Duke University, 1970-1974

Research Associate Department of Mechanical Engineering and
Materials Science, Duke
University, January 1975-July 1975

Design Engineer T.C. Cooke, P.E., Inc., Consulting Engineers,
Durham, NC, October 1974-February 1977

Director Section of Energy Management and Special
Projects, T.C. Cooke, P.E., Inc., Durham, February
1977-December 1978

Senior Project Engineer Center for the Study of Energy Conservation, Duke

and Systems Analyst University, November 1975-1984

Adjunct Associate Professor Department of Mechanical Engineering and
Materials Science, Duke University, July 1978-1984

President Sud Associates, P.A., Consulting Engineers,
Durham, NC, January |979-Present

Professional Society Affiliations

American Society of Heating, Refrigeration, and Air
Conditioning Engineers

American Society of Mechanical Engineers

Association of Demand Side Management Professionals

Sigma Xi

National Society of Professional Engineers/Professional
Engineers of North Carolina

70a

Professional License
Registered Professional Engineer: North Carolina, South
Carolina, Tennessee, Ohio, and Virginia

Professional Activity

Member, ASHRAE PC 100.5, Energy Conservation
Standards for Existing Institutional Buildings (1976-1982).

Chairman, Energy Conservation Committee, ASHRAE,
Triangle Chapter, NC (1978-79).

ASHRAE Technical Committee 4.7 - Energy Calculations
(Member 1978-83, Secretary 1981-83).

Member, TC 4.7 Subcommittees on Handbook and
Simplified Energy Calculations.

ASHRAE Technical Committee 4.6: Building Operations
Dynamics (Member 1985-present).

ASHRAE TC 9.6: Systems Energy Utilization (Chair 1998-
2000; Member 1987-present).

Member, Technical Advisory Committee, ASHRAE SP 56:
Development of a Guide for Analyzing and Reporting
Building Characteristics and Energy Use in Commercial
Buildings.

ASHRAE 669 - RP: Evaluation of Proposed ASHRAE
Energy Audit Forms and Procedures.

Voting Member, ASHRAE GPC-14: Measurement of Energy
and Demand S2vings.

Consulting Experience —
e Found

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0682%3A1. Public record. Not legal advice.