April 26, 2022
Master Metering v. Submetering: What’s the Difference for Your Utility Billing System?
While you don’t need to be an expert on metering infrastructure if you’re a multifamily property owner, there are some things that you should know. In this article, we touch on the differences between a master meter and submeter and what these differences can mean for your utility billing system.
A master meter and a submeter are not very different. They are both meters that measure utility usage. The difference is in the area they are measuring. Simply put:
- A master meter is the meter that measures the utility usage of an entire building.
- A submeter is built out past the master meter, and it measures a certain area of the building that the master meter measures.
That may seem like a small difference; however, it can mean a lot for your utility billing system in terms of operating costs and overall profitability of your property. Let’s get into what your utility billing system looks like with each metering option.
Utility Billing with Only a Master Meter
Master meters are usually put in place by the utility company supplying your building. Generally, that means you as the multifamily property owner don’t own the master meter, nor are you responsible for maintenance and needed repairs.
That can be a good thing and a bad thing.
On one hand, it’s a piece of equipment that you don’t have to worry about or assume liability for.
On the other hand, master meters and the utility companies the own and install them can be pretty rigid in their demands for installing them. That means you need to be prepared to meet their specifications for installation in new construction. These specifications could derail your plans for laying out your building’s utility components.
How to Bill Back with a Master Meter
When it comes to billing back utilities to your tenants, you’re left with a few options. You can either include utilities in the rent or charge a flat rate to all your tenants to utilities. However, this approach has a lot of drawbacks. The biggest one being that utility usage varies, and charging a flat rate back to your tenants means you run the risk of not fully recovering your utility cost.
There is a solution for billing back based on usage with only a master meter. It’s called ratio utility billing.
Ratio Utility Billing System (RUBS)
RUBS proportionally allocates utility costs to residents based on an industry-accepted formula that takes into account unit size, layout, occupancy and more.
It’s fast and inexpensive, and it improves utility cost recovery, allocates costs more fairly among tenants, decreases unnecessary consumption, and increases a property’s net operating income (NOI).
RUBS is a great solution for properties with only master meters. However, if your property allows for it, installing individual submeters is an even better way to accurately bill utilities back to your tenants. Here’s why and what this looks like.
Utility Billing with Submeters
When you install submeters on your property, you gain the ability to bill back your tenants based on their actual usage. That means you can accurately and reliably recover utility cost each month.
Installing submeters does come with some up-front costs, however. Unlike the master meter, you actually own and have to maintain the system. That means you’ll end up paying for the equipment, installation and any needed maintenance.
However, don’t let that up-front cost deter you from this option. Think of it as an investment in your property. A properly installed and maintained submetering system will pay for itself in saved utility costs. If you want to make sure your system is installed and maintained properly, then you’ll want to work with an expert.
The Benefits of Working with a Utility Billing Expert
It’s possible to handle a utility billing system in-house, but it’s a huge job that can get in the way of the other responsibilities you have with running your property. There are considerations you need to make every step of the way that can impact the ultimate effectiveness of your utility billing system.
From system design to bill generation, working with a utility expert can help you get the most out of your utility billing system. Here’s how:
- They can help you design and implement the right billing system for your building.
- They can help with accurate and timely billing that leads to a high collection rate.
- They can give you access to real-time usage metrics that allow you to stay on top of usage and detect leaks before they become costly.
For multifamily property owners, knowing the basic difference between a master metering and submetering utility billing system is important. This allows you to make an informed choice about billing for your property and tenants.
A submetering system is a wise investment in the overall profitability of your building. Going beyond just the master meter reading and billing utilities back to your tenants based on usage is a great way to cut utility costs and increase your property’s profitability.
If you’re looking to get started with submetering, we’re here to help guide you through the process. Contact us today to see how we can help you.