The Business Case for Submeter Upkeep

Submeter maintenance means potentially avoiding unnecessary expenses and regulatory headaches.

In Massachusetts, landlords must “retain an affirmative obligation” to maintain submeters and any other water conservation devices. They must also respond in a timely manner if a resident complains about an overcharge, and the resident shall have “all rights and remedies provided under law for such overcharges or such violations.”

The same goes for Texas, where the rental property owner is responsible for installing, maintaining and testing all submeters or point-of-use submeters. If a resident asks in writing for a meter test, the owner must prove the meter was calibrated or tested and shown to be accurate within the preceding 24 months.

In both states, the onus is clearly on the property owner or manager to ensure that submeters for water, electricity, and gas are working accurately and recording the correct usage.

Massachusetts and Texas are just two of 22 U.S. markets that have protocols and regulations that require apartments to maintain good meter health long after the installation is complete. Submeters must be periodically inspected for compliance and verified that they are in good working order. If they are not and a resident complains about an unusually high bill or problem, regulatory officials are likely to get involved and landlords could be held responsible for overcharges and repairs, even fines.

Some markets permit the landlord to estimate usage for only one month. After that, charges must tie to exact meter readings.

The growing use of submeters in multifamily and other housing and commercial spaces is a result of the desire of property owners to encourage conservation and mandates from city and state agencies to require monitoring of resident usage for water, electricity, and gas.

In the past, landlords could estimate usage and pass along costs to the resident. Now with a greater focus on energy conservation, some markets are prohibiting estimation and requiring operators to charge based solely on submeter readings.

The electric submeter industry has subsequently caught fire.

According to Research Nester, market research and consulting firm, the electric sub-meter market will have a compound annual growth rate of 12 percent through 2027. In its report, “Electric Submeter Market: Global Demand Analysis & Opportunity Outlook 2027,” energy conservation is coupling with rising demand for monitoring electric energy, which “is expected to boost the market growth of the electric submeter market across the globe.”

Also, “Global Electric Submeter Industry 2019,” released in June by Market.us, projects consistent revenue growth for the electric submeter market over the next nine years.

Submetering installation is only half the battle, though. With more meters in the marketplace, the focus is shifting to compliance and maintenance, says RealPage Senior Director of Submeter Operations Jay Mitchell.

“In the past it might have been a focus for the key competitive states,” he said. “Now we’ve had a huge increase in general awareness. Some markets may have had regulations and didn’t enforce them but they are now.”

Regulations and enforcement are evolving and vary by market but in most cases, the landlord can be responsible for paying excess energy or water consumption charges if the submeter is found to be faulty. In California, where a multifamily submeter mandate went into effect Jan. 1, 2018, and caused a ripple in the apartment industry, a landlord can be forced to absorb volumetric usage charges after 180 days if a problem has been investigated but not corrected.

Typically, regulators only get involved when a resident complains about higher than normal charges or an obvious problem, such as a leaking faucet or toilet that is sure to impact meter readings.

Submeter mandates have been frowned upon throughout the multifamily industry but it’s important, Mitchell says, that landlords comply and maintain their meters to avoid the possibility of a resident complaint that gets local and state regulatory officials involved.

“In North Carolina, if you have a resident who believes they are under-billed or over-billed they can file a complaint with the North Carolina Utilities Commission,” Mitchell said. “If you have too many complaints, it could be a huge deterrent. You could have some fines and penalties. And in some states, if you don’t correct it, you are no longer able to cover that utility expense.”

Mitchell recommends that meters be periodically inspected for signs of wear, including corrosion. The useful life of a meter is typically 10 years but one that goes unmaintained may not last as long. A new meter can run $65-$150 but absorbing usage charges and an unhappy resident can cost as much or more.

Sporadic and haphazard meter readings are a sign that something is wrong inside and outside the unit. Regular submeter maintenance can eliminate unnecessary headaches.

“Residents must have confidence that their meter is effective and accurate, and operators need confidence that it’s effective and accurate,” Mitchell said. “Submeters are an excellent way to encourage conservation. Like any hardware, they require maintenance and upkeep, and perform best when maintained.”

This article originally appeared in the Journal of Utility Management