A Guide to Ratio Utility Billing System (RUBS) and Submetering

No matter what kind of business owner you are, there are always lots of decisions you need to make. And there’s not necessarily a “right” answer for each decision.  

Most of the time, you just need to figure out what’s best for your specific business.  

One decision most landlords and property owners of multifamily properties need to make is whether to use the Ratio Utility Billing System (RUBS) or submetering as a utility billing method.  

Calculating utility bills is a common challenge for landlords and property owners, so it’s important to decide how you’ll deal with utility usage.  

So, if you’re struggling with this business decision, you’ve come to the right place.  

In this article, we’ll explain what each kind of utility billing system is, the pros and cons of both, and other pertinent information to help with your decision.  

Metering and Submetering  

All submetering is metering, but not all metering is submetering. I know, I know. Stay with me, here.  

Building meters measure energy delivered from the utilities into your building. The location of these meters often differs depending on geographic location.  

Submetering involves meters within your building for certain energy measurements. Submetering allows you to divide and assign utilities like gas, water, and electricity. It also allows you to better determine individual utility consumption.  

The local power company sends a utility bill to the the owner of a property every month for usage recorded on the master meter. Landlords or property owners typically then recoup utility expenses from tenants using submetering.   

Ratio Utility Billing System (RUBS) 

Submetering isn’t the only way to bill tenants for utilities, though. And, in some cases, it’s not a cost-effective solution.   

This is when RUBS comes into play. RUBS is another method to assign energy costs to tenants. RUBS is a utility billing method that uses factors like square footage, number of rooms, and number of occupants to calculate utility bills. There are a few methods using certain criteria typically utilized within RUBS:  

Ratio Occupancy Method  

This common RUBS method uses the number of residents in each unit to calculate a proportional share of utility costs.  

The simple RUBS formula starts with a baseline ratio by dividing the total number of residents in a property by the total number of units. This gives you the average number of occupants per unit. Every unit’s bill is then allocated by taking its occupancy rate compared to the average ratio.  

For instance, let’s say you have a property with 100 units and 150 tenants. The average ratio is two tenants per unit. If one unit has three occupants, its occupancy ratio is 1.5 (three divided by two). You then multiply this ratio by the total utility charges to calculate the allocated amount per unit.  

While this method isn’t perfect, you can see how it provides a solid estimation for who consumes more energy. It’s at least fairer than a method that simply charges each unit the same amount regardless of how many occupants live there.  

Square Footage Method  

Some landlords and property managers prefer using the square footage of each unit to calculate utility costs. The logic here is fairly obvious as well: a larger unit will use more energy. For example, the gas or electricity needed to heat a 1,500 square foot unit is much greater than an 800 square foot unit.  

Before you land on this method, though, look at each unit’s design. Just because there are larger apartments and smaller units, that doesn’t always mean the bigger ones have more appliances that use water or more occupants. Unit square footage doesn’t necessarily equate to more energy usage.   

Both Methods  

Some landlords and property managers also use both methods in combination to charge tenants. This typically involves weighing each method at 50% to figure out utility costs.   

Advantages of RUBS  

The main advantage of RUBS is that you can recoup the maximum allowable utility costs from tenants without investing in submeters. There are other advantages as well, though. Let’s look at them:  

• Impartiality: RUBS isn’t arbitrary. You follow the take into account the same factors for every unit.   
• Versatility: RUBS can work for almost all utilities, including water, electricity, trash collection, gas, and more.  
• Simplification: RUBS automates the billing process because it gets rid of the need for individual meters or separate billing arrangements for every unit. Naturally, this reduces overhead and simplifies the billing process.  
• Flexibility: RUBS allows you to account for a variety of factors like number of occupants and unit size. You can use factors that make sense for your properties. This flexibility helps with varying apartment layouts and changing usage patterns.  
• Cost: RUBS doesn’t require an investment of money.  

Advantages of Submetering  

On the other hand, submetering has many benefits as well. Here are some of them:  

• Fairness: Submetering is the fairest way to charge tenants for utilities because it calculates the actual energy a unit uses. Thus, your tenants know you’re paying for what you’re using, and you know you’re getting paid for what tenants consumed. 
• Conservation: Submetering incentivizes tenants to conserve as much energy as possible to save money. There isn’t a greater motivating force than this one in a tough economy.  
• Proactive Maintenance: Real-time information on power use across units can help get ahead of issues. For instance, submetering helps detect leaks by analyzing day-to-day usage of utilities.  
• Efficiency: If you have a cloud-based submeter billing software and get utility details are regular intervals, this kind of efficiency cannot be beaten.  

Disadvantages of RUBS  

Now that we’ve looked at the advantages of each method, let’s turn to the disadvantages. Here are a few cons when it comes to RUBS:  

• Lack of Specificity: Submetering doesn’t require estimations or formulas the same way RUBS does because it’s an exact reading of energy outputs. RUBS isn’t based on tenants’ actual usage of utilities, which can be frustrating and cause issues.  
• Lack of Motivation to Conserve: There isn’t as much incentive for tenants to conserve utilities because costs aren’t based on actual energy consumption.  
• No Proactive Maintenance: RUBS doesn’t offer data on usage in specific areas or help pinpoint things that may require attention before they become a full-blown issue.  

Disadvantages of Submetering  

Submetering isn’t without issues either, though. Let’s look at a few:   

• Cost: The initial investment needed is greater than with RUBS. You must get a company to install meters and make sure everything is properly set up. 
• Not Always Possible: Submetering installation isn’t possible with certain older systems. Practical roadblocks may also prevent submetering.  
• State Conditions: Some states limit submetering. Delaware, Idaho, Illinois, Indiana, and Louisiana all have conditions that you should research before you land on submetering.  

Important Note: Conduct research on state and local laws before landing on any kind of decision. It’s important to ensure you’re doing everything “by the book” to avoid as many issues as possible in the future.  

Conclusion  

As with most things in life, both of these methods have pros and cons. The choice is ultimately yours. Take a careful look at your specific business and decide which works best.