Utility Billing 101: Regulations — What They Are, Why They Exist, and Whether You're Affected

If you've been managing properties for a while, you might remember a time when utility billing was basically unregulated. You could allocate costs however you wanted, charge whatever administrative fees seemed reasonable, and nobody asked too many questions.

That time is over.

In Part 1 of this series, we covered what utility billing is and why it matters. Now let's talk about the force that's reshaping how every operator bills utilities: regulation.

Why Are Regulators Suddenly Paying Attention?

The short answer: tenant advocacy groups got organized, and legislators listened.

The longer answer involves three converging trends:

1. The Junk Fee Backlash

Starting with the federal Executive Order on Promoting Competition in 2021 and amplified by the FTC's focus on hidden fees, there's been a nationwide push against "drip pricing" — the practice of advertising a low base price and then adding mandatory fees at checkout. Rental housing got caught in this wave.

Utility charges, admin fees, and billing surcharges that weren't disclosed upfront are now being classified as junk fees in multiple states. We covered the specifics in The Regulatory Shift: The Junk Fee Crackdown.

2. Rising Utility Costs

According to the U.S. Energy Information Administration, residential electricity prices have increased approximately 25% over the past five years. Water and sewer rates have climbed even faster in many markets. As utility costs rise, so does the scrutiny on how those costs are passed to residents.

When a renter's utility charges jump from $80 to $150 per month with no clear explanation, they call their legislator. When enough renters call, bills get introduced.

3. The RUBS Problem

Ratio Utility Billing Systems (RUBS) are under particular scrutiny because they don't measure actual usage. A single resident living in a 600-square-foot studio can be allocated the same utility cost as a family of four in a 600-square-foot unit — depending on the formula used. Advocacy groups argue this is inherently unfair, and regulators are starting to agree.

We'll dive deep into the RUBS vs. submetering debate in Part 3, but the regulatory angle matters here: several states are actively considering restrictions or outright bans on RUBS. Seattle's Renters' Commission urged a ban on RUBS in January 2026. Colorado took the other route: HB26-1013 (March 2026) allows RUBS if four conditions are met: the total billed doesn't exceed the utility's charge, no fees are added beyond actual charges, common areas are excluded, and the method is disclosed in the lease. Ohio's HB 173, which would have placed submetering companies under public utility commission oversight, passed both chambers but was vetoed in June 2026.

What's Actually Being Regulated?

Not all utility billing regulations are the same. Here's a breakdown of the main categories:

Fee Transparency and Disclosure

What it means: Operators must disclose all utility-related charges upfront — before a lease is signed and in advertisements.

Where it's law: Colorado (HB 25-1090) and Connecticut (PA 25-44). Bills in New York (S363), Maryland (HB 0080) and California (SB 681) went further, but none passed in 2026.

Impact on operators: You need to be able to clearly explain every charge on a resident's utility bill. Vague line items like "utility surcharge" or "billing admin fee" are exactly what these laws target.

Billing Method Restrictions

What it means: Restrictions on which billing methods operators can use, and under what conditions.

Examples:

• Colorado's HB26-1013 sets conditions for RUBS and requires metering or submetering for properties whose permits are applied for on or after July 1, 2027
• Seattle has explored a RUBS ban
• Ohio's HB 173 would have capped submetered rates at the standard service offer, but was vetoed in June 2026
• Massachusetts HB 3545 would modernize submetering rules to allow newer technology

Impact on operators: If you use RUBS, check whether your state is considering restrictions. If you submeter, ensure your rates don't exceed what the utility company charges. See our full analysis in Submetering and RUBS Under Fire.

Rate Caps and Markup Restrictions

What it means: Operators cannot charge residents more for utilities than the actual cost — and in some cases, administrative fees are capped.

Examples:

• Colorado caps third-party billing markups at 2% or $10 a month, not both (a 2023 law), and HB 25-1090 applies that cap to utility charges
• Maryland's SB 130 bars submetered water and sewer charges above actual cost, plus up to $1 per unit per month for administration, from October 1, 2026
• California's SB 681 would have capped non-rent fees at 5% of monthly rent, but it stalled in the Assembly and missed the August 31, 2026 deadline

Impact on operators: If your billing process includes administrative fees, technology fees, or service charges layered on top of actual utility costs, check your state's rules. The trend is clearly toward cost-only pass-throughs.

Record-Keeping and Audit Requirements

What it means: Operators must maintain detailed records of how utility charges are calculated and make them available to residents.

Examples:

• Virginia SB 294 will require detailed calculation records for RUBS, submetering, and energy allocation, available to tenants, from July 1, 2027
• New York S8735 would have required itemized breakdowns and quarterly reporting, but never left committee

Impact on operators: If a resident asks "how was my utility bill calculated?" you need to have a clear, documented answer. This is where having a proper billing platform matters — it creates the audit trail automatically.

Stay compliant without the headache

VITALITY builds audit trails, itemized billing, and compliance documentation into every bill — automatically. Starting at $0.50 per unit.

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Am I Affected? A Quick Decision Framework

Not every regulation applies to every operator. Here's how to figure out your exposure:

The Compliance Checklist

Regardless of which state you operate in, here's a baseline checklist that will keep you ahead of the regulatory curve:

• Disclose all utility charges before lease signing. List every utility-related fee in the lease and in property advertisements.
• Document your allocation methodology. Whether you use RUBS, submetering, or a hybrid approach, have a written policy that explains how charges are calculated.
• Don't mark up utility costs. Bill residents for actual costs only. If you charge administrative fees, make them a separate, clearly labeled line item — and check your state's cap.
• Keep records accessible. Store billing calculations, meter reads, and utility invoices in a system that can produce them on request. Paper files in a closet won't cut it if a regulator comes calling.
• Review your billing practices annually. Regulations are evolving. What was compliant last year may not be compliant next year. Build a regulatory review into your annual operating calendar.

Where to Go Deeper

For the full details on every bill we're tracking:

• The Regulatory Shift: 2026 Compliance Guide — 30+ bills across 18 states, organized by status
• The Junk Fee Crackdown — fee transparency legislation state by state
• Submetering and RUBS Under Fire — billing method regulations
• New York's Five-Bill Push — the most aggressive state reform package
• Manufactured Home Protections — new requirements for MHC operators

What's Next in This Series

Understanding the regulatory landscape sets the stage for the rest of Utility Billing 101. In Part 3: RUBS vs. Submetering, we'll compare the two most common billing methods — including their regulatory standing, cost, accuracy, and conservation impact. It's the decision that shapes your entire billing strategy.

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