Do I have to rewire the electricity in my multi-family rental?

[Jinyu Shao]

Hi all, 

I need some advice on how to handle a situation that might require an expensive rewiring of the electricity in our home. 

I have a duplex in Queens where I rent out the first floor and live on the second floor with my family. We also have a basement but it's being used as storage and we rarely use it. 

A family has been renting the first floor from us for almost a year now. There is only one electric meter for both the first floor and the basement. When they first moved in, we had informed them about the shared meter for both the basement and the first floor, and had offered to pay a percentage of their electric bill every month. They had accepted this work-around. In the past few months, they became unhappy with their electric bill and involved ConED to investigate our home. We now are being forced to rewire the home because it's supposedly illegal to not have separate meter for the basement in this situation. 

My questions are:

1) Is it really illegal to not have a separate meter in this case?

2) What else can we do in this situation besides being forced to spend money on the rewiring?

3) I thought about offering to cover electricity within a certain limit and raising the rent, would this be a good solution?

Thanks for reading. Looking forward to your replies!