Billing a single property for utility consumption is easy, all you need is a single meter reading for water, electricity, and whatever other utility is measured. Your utility company then bills you according to a single meter reading of each utility consumed.
But what happens when a property is divided into different sections or units like a residential complex, shopping centers, industrial or commercial complexes? For these kinds of complexes, the whole property is still metered by the local relevant council and billed accordingly. It is the responsibility of the property management trustees to split the bill between all occupants, tenants, or members of the property, properly and accurately
What is Sub-metering?
Sub-metering or utility subsidiary metering (to give it its full name) is a system in which a landlord, managing agent, homeowners or residents association, or other person or company in charge of property management for multi-tenanted properties bill occupants, tenants, or members of the property for individual measured utility usage.
How do owners collect utility payments when a property is subdivided into sections or units?
Owners of properties that are residential, commercial, industrial, or spread over multiple different municipal demarcations must collect payments for utilities such as electricity and water from their tenants, members, or occupants.
There are various options available to property owners when billing tenants and collecting on utility payments. These options include:
- Charging a fixed recovery that is not linked to utility consumption and including utilities in the rent or levies.
- Requesting that the municipality install an additional, separately metered connection (which many municipalities refuse if a bulk meter has already been installed and the property not subdivided).
- Installing separate private electricity and/or water meters requiring monthly readings, invoicing administration, and payment collection.
- Installing prepaid sub-meters for each occupant to take care of their own purchases, collecting the money paid towards prepaid utilities, and settling the municipal account using the same.
Each of these options comes with advantages, disadvantages, and legal implications, but sub-metering is generally accepted as the fairest method of recovery, whether prepaid or postpaid.
Why Sub-metering Billing for Utility Connections is Complicated
Let’s look at a typical scenario where sub-metering is applied:
Consider a complex with 30 residential units. In this complex, there is a recreational park and communal gardens that need to be maintained and irrigated. Within the complex, there is also a clubhouse for meetings and other activities as well as a communal pool for all residents to enjoy.
In this scenario, the council meters and bills the complex in bulk for water and electricity consumption, i.e. the consumption of the entire complex is metered and billed by the council.
It is the responsibility of the body corporate run by a duly elected board of trustees to invoice the owners of each unit of the complex for their respective utility consumption.
When the consumption of each of the 30 units is added up it is less than the bulk consumption of the entire complex, resulting in a shortfall. Why is there a shortfall? The clubhouse, park, gardens, carports, and pool all consume water and electricity, which can be considered as communal consumption. This consumption also needs to be paid for by the residents of the complex and must therefore be included in the utility invoice each unit receives monthly. There are four ways in which this shortfall is typically divided between the units in the complex. It could be
- divided equally between all the units in the complex; or
- based on the consumption of each unit – the higher the consumption is of a unit the more they need to pay towards the communal consumption; or
- based on the PQ (Participation Quota) in which case the amount paid by an owner is directly equivalent to the size of that particular unit as a percentage of the total under roof area included in the complex.; or
- included in the normal administrative levies as a normal expense which effectively translates to the same charge as in option 3 above.
Another factor that complicates the billing process is variable tariffs. Let’s say there is a cluster in the abovementioned example that has its own private pool, the complex managers might demand that this particular unit pays an additional surcharge for water because it uses more communal water to top up the pool. These variable tariffs need to be taken into account when billing each unit for utility consumption.
From the scenario described above, it is clear that there are many variables to consider and many metering data points that need to be recorded and processed to produce a monthly invoice for each resident of the complex that is fair and accurate. In most cases, this process is handled manually usually in spreadsheets. Manual systems like these are labour intensive, time consuming, susceptible to human error, and just inefficient overall.
A body corporate does not posess the right to disconnect delinquent, non-paying residents or owners without a court order bestowing this right on them. As such it is a requirement for the body corporate to go to court to get disconnection authorisation.
If a complex bulk account is in arrears, the entire complex will be disconnected. This is why it is important to have an efficient system in place to deal with non-paying residents/owners. If one unit does not pay in full or on time the shortfall will need to be covered by another surplus perhaps intended for maintenance or other projects in order to avoid municipal disconnection effectively requiring paying owners to carry the delinquent whilst maintenance to their properties and special projects budgeted for remains on hold.
What a Good Sub-metering Billing Solution Must Achieve
An effective sub-metering billing solution must be a centralized, fully integrated system that takes into account bulk metering, submetering which includes physical meters and ghost meters (meter measurements that are based on equations instead of physical readings), the difference between the bulk meter and submeter readings, and variable tariff rates. This system then needs to produce a fair and accurate invoice for each utility consumer involved.
With over three decades of in-depth field-relevant billing, metering, and property management experience, our team at Consolidated African Technologies (CAT) has produced a solution that does exactly what a submetering billing solution must. We call it The CUBE – CAT Utility Billing Engine.
The CUBE can be applied to:
- Residential estates
- Factory complexes
- Industrial complexes
- Sectional title complexes
- Commercial office blocks
The CUBE accommodates all the different permutations of tariffs and rates that could depend on:
- Deployment – residential, commercial, industrial, multi dwellings, etc.
- Measurements – Consumption or Maximum Demand
- Metering Methodologies – pre and post-paid
- Seasonal usage and rates
- Time Of Use – on-peak, standard and off-peak
- Installation – single phase vs 3 phase electricity supply, including split phases between units, etc.