I'll start by apologizing to Ontarians for not saying "hydro meter". Anyone outside of Ontario reading this might think hydro means water, and rightfully baffled when we're actually referring to electricity. Who can blame them? Imagine someone in Texas calling it a coal meter.
Sorry for digressing early on.
It's easy to manage utility cost issues when you have a single tenant on your property. They pay for all electricity use, full stop. It gets tricky when you have a secondary suite with two separate tenants.
The big questions is, "Should I separate the electrical meters so that each tenant can pay their own consumption"? It depends (Don't you hate that I never give a straight answer?).
There are pros and cons to either, and I've had clients that have created two separate meters, as well as those using a single meter for both units. The better solution depends on several factors and your intentions for the property.
Let's break down the benefits and costs for each option.
Having Two Separate Meters
If you're putting in separate meters, it makes sense to increase the electrical capacity if it's 100 amps or less (most homes). 200 amps is ideal for an average single family home with a secondary suite.
The chief benefit to doing it this way of course is tenants pay for their consumption. As we all know, if it's included in rent, you're less likely to switch off the lights when you run off to the supermarket.
The other advantage of course is increased capacity if you're upgrading to 200 amps. With a secondary unit, you will have a lot more usage. Think two 40-amp stoves and two 30-amp dryers. Add to that, Thanksgiving dinner full of people and electronic devices. Just a 100 amp service is a recipe for the main breaker to trip and an under cooked Turkey. The safety authority in your area might not even allow that to begin with.
If this property will be sold in the future to another investor, there's a good chance a legal secondary suite home already equipped with separate meters will be more appealing, and might fetch you a higher selling price.
The obvious main drawback is the higher upfront costs, time and effort associated with the process. You'll need to arrange this with your local distribution company as well as your master electrician. The cost to do this can be in the range of 3 to 5 thousand dollars, depending on how the wire is coming in from the street, whether it's overhead or underground.
Having A Single Meter For Both Units
Now let's look at a shared single meter with one bill. If the owner lives in the main unit, they may include the electricity in the rent, or charge the tenant 40-50% of the total consumption. The latter strategy can get a bit tricky, but still manageable for owner-occupied properties.
But what if you're a landlord and have two separate tenants? I know landlords who will pay for the electric bill, and charge back the tenant on a 60/40 split. This can really get tricky especially since there is no way to enforce that they will pay you. Add to that a potential relationship nightmare between the tenants.
I can picture it right now. "Why should I have to pay for Billy Bob's aspirations of being a professional gamer, racking up the bill with his 24/7 video game addiction?!"
I recommend including it in the rent, and charging accordingly based on estimated consumption. The obvious drawback as we alluded to earlier is that tenants are not going to be responsible with consumption when you're the one paying. That's a business pill you'll have to swallow.
My advice is to make your fixed devices as efficient as possible. I'm talking super energy efficient appliances (laundry, stoves, fridges) and LED lights. Even though LED lights last a long time, have a few extra ones available to avoid having tenants run to the dollar store and grabbing a pack of 100 watt incandescent bulbs. Also make sure your heating system and insulation is adequate, and not causing them to plug in a baseboard heater, since those are huge energy suckers.
Another benefit of keeping a single meter is the flexibility to convert it back to a single family home if it makes sense to do so. The vast majority of the market for homes are still end-users as opposed to investors.
I always recommend designing the secondary suite that can seamlessly be incorporated as part of the original home, or at least easily convertible back to single family. Having two separate meters might make that a bit awkward.
So ultimately what's my recommendation? Again depends on your circumstances. It might be better to have two meters if you plan on holding the property long term, and your cost savings will outweigh the initial cost.
I tend to lean towards leaving a single meter due to the cost as well as all the additional work involved. You can always decide to add an extra meter later.
And our favorite benefit - the cost savings! I'm sure you can figure out a better use for a few extra grand!
Thanks for reading! Have you done two separate meters before, or kept a single meter for your 2-unit home? If so, tell me about it, and how it worked out in the comments below.