The recent passage of Measure BB has brought a new rule regarding the cost of utilities outside of the cost of rent in rent-controlled properties. Measure BB modifies the Rent Stabilization Ordinance to read that:

 A tenant may only be responsible for utilities if:

1. The utility charge is included in the base rent and does not increase during the tenancy, OR
2. The utility service is separately or individually metered, and the lease agreement requires that the tenant registers the utility account in their own name.

Gone is the common practice of RUBS (ratio utility billing systems). Using RUBS, owners would take a utility bill cost and split it amongst units at a property based on such data as number of bedrooms, square footage, occupancy count, etc.

The newly established prohibition on the use of RUBS will insulate tenants from the actual utility cost particular to their usage. Unfortunately, decades of research have proven that this often leads to higher consumption ¹.

Submetering of Utilities

Measure BB does account for possible ration billing by nature of “other technologies”, under some yet-to-be-defined rules. Measure BB states that you could charge for utilities outside of the monthly rent if:

“The utility service is in compliance with Board regulations, specifying other technologies, mechanisms, or policies that the Rent Board deems functionally similar to separate and individual metering.”

A variety of companies offer sub-metering tools and services to apartment groups which are then typically billed to the tenant through a separate account and payment via credit card.

Unfortunately, physical installation of sub-meter equipment is building-specific and can be quite difficult and/or costly. In theory electricity, gas, water and even Internet/Wi-Fi can be metered separately, but can be made more complicated by the path of water, pipes, or electrical lines.

Submetering has the potential to make cost sharing more fair for tenants, but it adds total costs due to service and credit processing fees.

Seeking Investor ROI for Submetering

A bright spot in submetering is measuring the use of heated water. For the cost of one or two water tank replacements, an owner can pay for submetering equipment and start charging tenants for water heating service. As this is not a “utility” but rather a service related to a utility, it may not fall under the new regulations of Measure BB.

At that point a more readily maintained single water heater can be used or possibly even a heat pump.

Benchmarking

In part because tenant meter data is private (such as PG&E usage), owners may know very little about the energy use and performance of their building by unit.

There’s now a free option to get the aggregate energy for a building and compare a building’s performance against other similar buildings. Below is an example of a 15-unit property that did a partial switch over from gas to electric in 2023:

This can be set up through the Environmental Protection Agency’s “portfolio manager” as long as proof of ownership for the building is given. Use of this product s mandatory for buildings over 15,000 square feet as outlined in the Berkeley Building Emissions Saving Ordinance (BESO).

¹ For example the “National multiple family submetering and allocation study” in cooperation with UC Berkeley and EBMUD, published 2004.

Bryce Nesbitt, Obviously Inspects, is a property inspector, EV charging designer, and grant writer. He can be reached at 510-383-6663 or bryce2@obviously.com