Is Submetering Legal? Rules by State and Utility
Last reviewed October 2026Reviewed by Grant Forehand, Compliance Officer, 20 years with NES
Submetering is legal in most states, but rules differ for water, gas and electric. See what the rules require, with examples from TX, CA, GA, FL and NC.
Is submetering legal?
In most of the United States, submetering is legal. Property owners can install private meters to measure individual resident utility use for water, gas, or electricity, then bill each unit for its actual use. Submetering regulations vary by state, county, and city, and these rules change over time. Most states require that you bill residents at the utility provider's actual rate without adding a markup on the utility cost. Common requirements include a lease disclosure, meters tested for accuracy, local permits, and in some states registration before the first bill.
This guide explains how utility rules work for owners of apartment communities, condominiums, townhomes, and mobile home parks. You will learn what states generally require, where local rules add extra steps, and how to keep utility billing compliant.
The short answer
In most of the United States, submetering is legal. Many places encourage it, because residents who pay for what they use waste less.
Cost recovery is the main legal standard behind submetering laws. In most states, an owner cannot profit on resold utilities. You recover the utility expense by passing through charges based on measured use. You cannot mark up the price of water, gas, or electricity.
Common areas remain your responsibility. Charges for lawn irrigation, a swimming pool, clubhouses, outdoor lighting, and shared laundry rooms stay with the owner. The total billed across all residents can never exceed the master-meter bill from the utility.
How the rules differ by utility
Each utility follows its own regulatory structure and safety codes. Water, gas, and electricity are governed by different state and local agencies.
Water submetering rules
Water rules differ widely from state to state and city to city. Many jurisdictions encourage water metering because it drives resource conservation. Once residents pay for their own water, water use typically drops 15 to 30 percent. At one 337-unit community, NES added meters as leases renewed, so for a while both setups ran side by side. The 168 submetered units averaged 3,868 gallons per unit per month, 34% less than the 5,846 gallons used by the 169 units not yet metered. Their average bill was $54.22 a month against $84.72, 36% lower, or about $30 per unit. Across all 337 units, that gap is worth roughly $123,000 a year.
Local codes dictate how meters must be installed and billed. Some jurisdictions limit administrative fees, while others require specific plumbing clearances or pre-installation accuracy testing. Our guide to what submetering is covers the basics.
Gas submetering rules
Gas rules vary by state and locality, and several states restrict billing residents for gas. Because gas lines carry fire and mechanical risks, equipment must meet strict safety codes. Local building departments often require plumbing inspections before gas submeters can go into service.
Where natural gas submetering is allowed, residents are billed only for their individual use at the utility's rate. If a property uses central gas boilers to supply domestic hot water or hydronic heat, private meters might not fit the plumbing layout. Our gas submetering guide covers when gas meters fit.
Electric submetering rules
Electric is the most regulated utility. Some states require approval before an owner can bill residents for electricity. In fact, some states do not allow owners to bill residents for electricity at all.
Where private systems are allowed, electric rules are the strictest and vary by state. Public utility commissions set tight limits on how power can be measured and billed. If you are exploring electric submetering, check state utility commission rules before ordering equipment.
What submetering rules usually require
State laws and city codes share several common standards. Checking these requirements helps keep your billing program compliant.
- Measured use billing. Residents are billed for their measured use, not more than the utility's cost.
- No utility markup. In most states, an owner cannot profit on resold utilities. Common-area use stays with the owner.
- Lease disclosure. The lease must disclose how utilities are billed.
- Billing fee limits. Some states cap administrative or billing fees.
- Equipment accuracy testing. Meters generally must be tested for accuracy before they go into service.
- Installation and maintenance standards. Standards apply to how meters are installed and kept up.
- Permits and inspections. Local building permits are often required before meters go in, especially when retrofitting water lines or electrical panels.
A few state examples
State rules differ in what paperwork and approvals they require before billing begins.
Texas
- Who regulates
- Public Utility Commission of Texas
- What to know
- Water and sewer submetering is regulated under 16 Texas Administrative Code Chapter 24. Owners must register before billing residents. Learn more about Texas submetering rules.
California
- Who regulates
- California Civil Code
- What to know
- Owners bill residents for measured water use at the utility's rate with no markup on the water. The Civil Code allows a small billing fee, the lesser of about $4.75 per unit or 25 percent of the usage charge. See the California submetering guide.
Georgia
- Who regulates
- Georgia state statutes
- What to know
- Georgia requires water submetering in much new multifamily construction. Read about Georgia water submetering laws.
Florida
- Who regulates
- Florida Public Service Commission
- What to know
- Florida regulates water and wastewater submetering through the Florida Public Service Commission. Counties such as Miami-Dade can add their own registration or billing requirements. Review Florida submetering laws.
North Carolina
- Who regulates
- North Carolina Utilities Commission
- What to know
- North Carolina requires a certificate from the North Carolina Utilities Commission before billing. See North Carolina submetering regulations.
Local rules on top of state rules
State law is not the only standard you must meet. County governments and city councils frequently establish their own utility ordinances, plumbing amendments, and tenant protections. These local requirements apply directly on top of state regulations.
Florida provides a clear example. The Florida Public Service Commission regulates water and wastewater submetering at the state level. Even so, counties such as Miami-Dade can add their own registration or billing requirements.
Local building departments also control permitting. A city may demand an on-site plumbing inspection before meters can be turned on, while a neighboring county might require only a licensed plumber. You must confirm local rules for your exact address before buying equipment.
Telling residents: lease disclosure and notice
Staying compliant requires clear communication with residents. You cannot install meters and begin mailing bills without updating your lease documents.
Your lease agreement must include a clear submetering disclosure. This clause explains how utilities are measured, how rates are set, and how bills are delivered. If utilities were included in rent, changing that in the middle of a lease invites disputes, so plan the switch around renewals.
Most owners phase in submetering as leases expire and come up for renewal. Written notice tells residents when the change begins and how their bills will be calculated. Clear notice helps prevent disputes and prompts residents to report maintenance issues like a running toilet.
How NES keeps billing compliant
Managing utility billing across changing state, county, and city codes takes constant attention. NES (National Exemption Service) has billed utilities for multifamily properties since 1968. Privately owned and based in Safety Harbor, Florida, we serve properties in 43 or more states. We focus on communities of 80 or more units, including apartments, condominiums, townhomes, and mobile home parks. Our in-house compliance team checks the rules for your property's exact address before quoting, and our president serves on the board of the Utility Management and Conservation Association.
Because we bill residents ourselves, the compliance work is built into every cycle: the rate, the fee where one is allowed, the lease language and any filings the state requires.
If the plumbing makes meters impractical, we also offer RUBS (what RUBS is). Ratio utility billing splits the master bill by a formula such as occupants or square footage. RUBS needs no equipment, and recovery starts with the first billing cycle, though it is not allowed everywhere. Through our water, gas, and electric submetering programs, we recommend what fits your building best.
This information is general guidance, not legal advice. Our compliance team checks the rules for your exact address and sets billing to match.
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