The landlord is refinancing the condo which I am renting. In order to get better terms as an owner-occupied unit, she wants me to transfer the utility bills back into her name in order to prove to the lender that she is living in the condo. What will happen if I go along with this proposition?

Follow your instincts. What the landlord is attempting to do is to have you participate in her scheme in order to obtain a lower interest rate. That's illegal--knowingly taking part in the scheme and committing fraud on her lender, the financial institution. You would be running the risk of incurring some potentially hefty penalties. Since you want to stay on good terms with her, you might try to "lay low", take a very long vacation to the Virgin Islands, or simply tell her the potential penalties resulting from such action on her part as well as on yours.