A second electric meter at $9,000, or folding the ADU's power into the rent

Question

Take a detached 700 square foot ADU going behind a house, plans close to done. The electrician prices a second electric service and meter at about $9,000 including the trench and a new subpanel, and says the alternative is running the ADU off the existing panel and either eating the power or billing the tenant somehow. The billing part is where most owners get lost. If the ADU sits on the main house meter, can the owner charge a tenant for electricity at all? The advice that circulates online is to add $75 a month to the rent and call it done, which sounds simple enough to be wrong. Water is the bigger worry, since an ADU with a full kitchen and bath lands on a city water and sewer bill that already runs about $110 a month for the main house.

Rena Guide · Accepted Answer

Three different arrangements get lumped together as metering, and they behave differently.

A separate meter means the utility runs its own service to the ADU and bills the tenant directly in the tenant's name. A submeter is a private meter you install downstream of your own meter; the utility bills you, you read the submeter and bill the tenant for the measured amount. Ratio billing, sometimes called RUBS, has no meter at all, you divide the actual bill by a formula like square footage or number of occupants and pass along the share.

What you can charge a tenant for submetered or ratio-billed utilities is set by state law and sometimes by city ordinance. Some places require a specific disclosure in the lease, some cap or ban any markup over the utility's rate, and a few restrict ratio billing entirely. So check your state's landlord-tenant rules and your city's before you pick a method, and write the method into the lease rather than handling it by text message later.

The $75-in-the-rent version isn't automatically wrong, it just isn't billing. It's a flat rent that includes utilities, so you carry the risk if the tenant runs electric heat in January. That is fine if you price it with room to be wrong.

On water, ask your utility what a second service costs to establish, because many charge a fixed monthly base fee per connection plus a sewer charge tied to water use. Two connections can mean two base fees whether anyone lives there or not.

omar_haddad · Answer

Get your panel load calculated before you decide anything. I've watched a 100 amp service turn a "simple" garage conversion into a $7,500 service upgrade because the ADU added a range, a mini split and a dryer. If you're already paying to trench for water and sewer, adding the electric conduit in the same trench is cheap. Opening that trench twice is not.

Rena Expert · Answer

Run the $9,000 against what separate metering actually saves you. If tenant electric averages $70 a month and you'd otherwise bury it in rent, you're not saving $70, you're saving the difference between what you can charge and what the power actually costs, which is usually closer to $20 or $30 once you price the rent competitively. At $30 that's a 25 year payback on the service. The number that makes it worth doing is rarely the utility spread.

The reasons that do carry weight: some jurisdictions require separate service as a permit condition, so ask your building department before you price the alternative. A separately metered and separately addressed unit is easier to document as a legal second dwelling later, which matters for appraisal and for any future sale. And a tenant with the account in their own name means their nonpayment is the utility's collection problem instead of a balance riding on your bill.

The part I'd nail down now is capacity. A 100 or 125 amp service with a heat pump water heater and an induction range in the ADU is where the budget moves, and the utility's transformer on your street can add a wait that no contractor controls. Get a written load calculation and a written utility timeline before you commit to a schedule.

On vacancy, base charges on two connections keep running when the unit is empty. Small, maybe $40 a month combined, but it's a fixed cost your pro forma probably shows as zero.

tonyv88 · Answer

Water is the fight, every time. Electricity a tenant can feel and control. Water they cannot, so a ratio split lands as "why am I paying for your lawn." Leases that spell out a flat water charge inside the rent generate almost no disputes. Leases that pass through a percentage of a variable bill generate one most months.

gregpowell66 · Answer

Same trench, one mobilization. Water line, sewer, electric conduit and a gas line if gas is in the plan, all coordinated before the excavator shows up. That single decision saves more on ADU site work than anything on the design side.

aaron_fitz10 · Answer

Reading this, the flat-rent version looks right for a first one and the separate service looks right if the place might ever be sold as two units. Cobalt, do you know yet whether your city allows an ADU to be sold off separately? Many do not, and where that is the case most of the argument for the $9k disappears.

mikeoconnell7 · Answer

Get the connection fee in writing from the utility rather than from the electrician. The trench price and the utility's own charge to set a new meter are two separate bills, and owners have a way of discovering that after the concrete is poured.

A second electric meter at $9,000, or folding the ADU's power into the rent

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