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Why You Should use a Ratio Utility Billing System – By Jerry Baker

Posted on 01. Oct, 2016 by in all

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For entities who wish to bill for water, sewer, gas, or electricity, submetering may not be an option due to construction restrictions or, a limited budget. As such, owners, and operators are left searching for alternatives in the absence of submetering. The most equitable alternative is to deploy a Ratio Utility Billing System, commonly referred to as “RUBS”. 

RUBS is defined as a billing method which allocates a property’s provider invoice by service to consumers based on an occupant factor, square footage factor, fixture factor, room factor or combination of each less a predetermined percentage of common area allowance. The intent of deploying this methodology is to create a fair method of applying usage costs based on applying consumption trends. Typically, the occupant factor method is applied to water/sewer while reserving the square footage and occupant factor combination for gas/electricity. Each ratio also considers the number of days a unit is under lease. The methodology relies on an assessment of each dwelling unit in a multifamily residence to quantify how much of the commodity each unit is likely to consume in comparison to other units. By leveraging square footage and occupancy data for every unit it creates the ability to determine a percentage of the total provider invoice that should be allocated to each unit and bill accordingly. Let’s explore some of the reasons why utilizing a RUBS billing methodology is so advantageous. 

Why You Should Use RUBS

  • RUBS promotes consumer conservation. Upon implementation of the RUBS billing method for utilities, owners can expect a 13% to 18% reduction in expenses on average. Studies have shown that as a consumer’s bill rises, and falls with consumption amounts, they use less of the commodity. Whereas submetering encourages conservation at the unit level, RUBS encourages conservation from the community level as a whole.
  • Aside from conservation, RUBS also aids in the recapture of rising commodity expenses. By connecting your asset to a RUBS methodology, systematically, you are able to pass on the varying costs directly to consumers. The methodology operates by taking the master metered invoice from the serving utility, allocating the consumption, and utility costs based on the chosen formula, mailing invoices and receiving payments on behalf of the community. In turn, this creates the opportunity to recapture lost utility costs with a directly correlated alignment to the utility expenses.

A key question you may be asking yourself at this point, “How fair is this type of methodology to consumers?” Without submeters, many HOA’s and apartment communities simply bill their consumer a fixed cost for water, or include the utilities with rent. This not only discourages conservation, it also results in lost revenue while treating all units equally in terms of consumption, regardless of how much each unit is actually consuming. While RUBS billing does not measure a consumer’s exact usage, the common unit or units of measure being used to allocate the utility expenses are based upon longitudinal statistics industry-wide. In most states across the nation, this is considered a fair and feasible alternative in the absence of submetering. Each state as well as municipality will set tariffs regarding which criteria can be used in generating a RUBS allocation for billing purposes.

Let’s look at a quick example – a unit of 1,200 square feet has more rooms, and generally more occupants than that of a 750 square foot unit. It takes more gas or electric to heat the first unit, an increased number of occupants would generally increase the amount of water used. Therefore, the bill for the 1,200 square foot unit would be understandably higher than that of the 750 square foot unit. Combined with occupancy data, and deductions for common area usage, RUBS is a fair method of billing. 

  • RUBS is also a way to boost net operating income, it immediately improves cash flow, requires no capital investment, can be implemented quickly, and helps avoid future budgetary concerns arising from rate hikes. Across the nation, utility providers must increase the rates billed to their constituents to adequately continue to maintain their infrastructure and offset rising expenses as they pertain to the supply/demand of the commodity. Utilities are the third largest management expense, and as such rising rates can wreak havoc on your utility budget. A RUBS billing methodology takes the current rates into consideration within the allocation formula, leaving you worry free about future increases. RUBS truly provides an advantage that allows you to increase revenues without increasing your rents.
  • RUBS is a nationally accepted alternative to submetering, flat rate billing, and continuing to absorb 100% of utility costs. When you face construction restrictions, a limited budget, or plumbing/electrical configurations gone awry, RUBS will solidify your infrastructure without capital investments. It is a quantifiable, and equitable cost recovery program designed to reduce consumption, and insulate oneself from future cost increases.

Jerry Baker has been the President of National Exemption Service (NES) since 1988.  Headquartered in Florida, NES is one of the oldest submetering firms in the United States.

For information concerning a comprehensive Utility Management Program, feel free to contact sales@submeter.com.