California Rental Utility Billing Rules for Landlords: RUBS, Submetering & AB 1248 (2026)

California landlords can charge tenants for utilities, but the rules governing how you bill, what you disclose, and how much you can pass through are more complicated than most landlords realize. In the Sacramento and Placer County market, where water and sewer costs have risen 5% annually since 2024 according to the Sacramento Suburban Water District, getting utility billing right protects your bottom line and keeps you out of legal trouble.

Three billing methods dominate California rentals: direct metering (each unit has its own utility account), submetering (landlord-owned meters that measure individual usage), and RUBS (ratio utility billing systems that allocate costs by formula). Each method has different legal requirements, different risk profiles, and different economics. The California Attorney General's 2025 enforcement action against Mission Rock for using RUBS as "shadow rent increases" made clear that the state is watching how landlords bill for utilities -- and willing to prosecute violations.

This guide covers every billing method available to California landlords in 2026, the specific laws that govern each one, the status of AB 1248, and practical steps for Sacramento-area property owners who need to audit their current setup.

TL;DR: California landlords can bill tenants for utilities through direct metering, submetering (with strict disclosure and fee caps under Civil Code 1954.202-1954.210), or RUBS (currently legal but under regulatory pressure). AB 1248 -- which would ban RUBS for everything except water and sewer -- stalled as a two-year bill in June 2025 but may return. Master-metered properties must charge tenants at the same rate the utility charges the landlord (PUC 739.5). Landlords cannot profit from utility pass-throughs. The safest approach in 2026: submeter where possible, disclose everything in writing, and audit your RUBS formulas before the next legislative session.

Three Ways California Landlords Can Bill for Utilities

Every California rental property falls into one of three utility billing categories. The method you use determines what laws apply, what disclosures you owe tenants, and how much legal risk you carry.

1. Direct Metering (Individual Utility Accounts)

Each unit has its own utility meter, and the tenant establishes a direct account with the utility provider (PG&E, SMUD, the City of Roseville, etc.). The landlord has no involvement in billing. This is the simplest and lowest-risk method for landlords.

When it works: single-family rentals, newer multifamily construction with individual meters, and any property where each unit has separate utility connections. In Placer County, most single-family rentals built after 2000 have individual meters for all utilities.

When it doesn't work: older apartment buildings with shared or master meters, properties where common areas share utility connections with tenant units, or buildings where retrofitting individual meters isn't economically feasible.

2. Submetering (Landlord-Owned Meters)

The landlord installs submeters on individual units behind the master meter, measures each unit's actual usage, and bills tenants based on measured consumption. California regulates this heavily through Civil Code Sections 1954.202-1954.210 (enacted by SB 7) for water, and through Public Utilities Code 739.5 for gas and electricity.

3. RUBS (Ratio Utility Billing System)

The landlord receives a single utility bill for the property and allocates costs among tenants using a formula based on factors like square footage, occupant count, number of bedrooms, or a combination. RUBS does not measure actual usage. It estimates each unit's share of the total.

This is the method drawing the most regulatory attention in California right now.

RUBS (Ratio Utility Billing) Rules in California

RUBS is currently legal in California for most utility types, but the rules are tightening. Here's what landlords must know right now.

What Is RUBS and How Does It Work?

A RUBS program takes the total utility bill for a property and divides it among tenants using a predetermined formula. Common allocation methods include:

• Square footage: Each unit pays based on its percentage of total rentable square footage
• Occupant count: Each unit pays based on the number of residents
• Bedroom count: Each unit pays based on the number of bedrooms
• Hybrid: A combination of factors, weighted by the landlord or billing company

For example, a 10-unit building receives a $2,000 water bill. A unit with 2 occupants in a building with 20 total occupants would owe $200 (10% of the total). The problem: that unit might actually use less water than average, or more. RUBS doesn't measure -- it estimates.

The Core Legal Rule: No Profit on Utility Pass-Throughs

California law is clear: landlords cannot profit from utility billing. You can only pass through actual costs. The total amount collected from all tenants through RUBS cannot exceed the total utility bill for the property. Any markup, administrative surcharge, or "convenience fee" added on top of the actual utility cost is a violation.

This creates a practical challenge: most RUBS programs use third-party billing companies that charge $3-$8 per unit per month. That billing company fee must come out of the landlord's pocket, not be passed through to tenants as part of the utility charge (unless the lease specifically identifies it as a separate service fee, and even then, courts scrutinize it).

The Attorney General's "Shadow Rent" Crackdown

In November 2025, California Attorney General Rob Bonta announced a $495,000 settlement with Mission Rock Residential for using RUBS to circumvent rent increase caps under the Tenant Protection Act (AB 1482). The company raised rents close to the legal maximum while simultaneously switching tenants to RUBS billing for water, sewer, and garbage that had previously been included in rent.

The AG's office called this a "shadow rent increase" -- unbundling services historically included in rent and charging for them separately, on top of the maximum permitted rent increase. The settlement terms prohibit Mission Rock from repeating the practice and include injunctive requirements for future compliance.

Local RUBS Restrictions

Several California cities have already restricted or banned RUBS independent of state law:

• San Jose: Prohibits RUBS for rent-stabilized units
• Santa Monica: Bans RUBS for units under the Rent Control Board's jurisdiction
• Mountain View: Restricts RUBS under the Community Stabilization and Fair Rent Act
• Richmond: Limits RUBS billing under its rent stabilization ordinance

Sacramento and Roseville do not currently have local RUBS restrictions beyond state law, but the trend is clearly toward tighter regulation. Landlords in Roseville and other Placer County cities should track their city council agendas for any proposed utility billing ordinances.

Submetering Requirements: SB 7 and Civil Code 1954.202

Submetering is the middle ground between direct metering and RUBS. You measure actual usage per unit, but the landlord owns and operates the meters. California regulates this primarily through SB 7 (2016), codified in Civil Code Sections 1954.202 through 1954.210 for water submetering.

Water Submetering Rules (Civil Code 1954.202-1954.210)

If you submeter water on a property with two or more dwelling units served by a single master meter, you must comply with all of the following:

1. Meter standards: Submeters must conform to state rules governing weighing and measuring devices and be installed per specifications for measuring devices
2. Exclusive measurement: Each submeter must only measure the water use of that specific dwelling unit -- not common areas or adjacent units
3. Tenant access: Submeters must be accessible to tenants and readable by the landlord without entering the dwelling
4. Maintenance: Landlords must furnish, install, maintain, and repair all submeters at their own cost
5. Accuracy testing: Landlords must submit submeter information to the County Department of Weights and Measures for accuracy testing

What You Can Charge on a Submetered Water Bill

The monthly bill for submetered water service may only include three categories of charges:

• Volumetric usage: The amount of water consumed as measured by the submeter, charged at the same rate the water purveyor charges the property
• Fixed charge allocation: A proportional share of any recurring fixed charges billed to the property by the water purveyor
• Administrative fee: A billing or administrative fee capped at $4.75 per month or 25% of the amount billed, whichever is less (Civil Code 1954.204)

That $4.75 cap is significant. Third-party billing companies often charge $5-$10 per unit. The difference comes out of your pocket.

Pre-Lease Disclosure Requirements

Before a tenant signs a lease on a submetered property, you must provide a written disclosure (in at least 10-point type) that includes:

• Notice that the tenant will be billed for water service separately from rent
• An estimate of the monthly bill based on either the average or median bill over the past 3-6 months, or the amount based on average indoor water use of a family of four (approximately 200 gallons per day)
• Contact information for billing questions
• A description of all charges that may appear on the bill

Failure to provide this disclosure before lease signing doesn't void the lease, but it creates a compliance gap that tenants can use to challenge utility charges. For a complete template of lease provisions, see our California lease agreement guide.

Gas and Electric Submetering (PUC 739.5)

Gas and electric submetering follows different rules under Public Utilities Code Section 739.5. The core requirements:

• Same-rate billing: You must charge tenants at the same rate the utility would charge them directly -- not the master meter rate, which may be different
• Rebate pass-through: Any rebates received from the utility must be distributed to tenants proportionally based on their consumption
• Rate schedule posting: You must post the current residential rate schedule from the utility (PG&E, SMUD, etc.) in a conspicuous location accessible to all tenants, or provide the utility's website URL where rate schedules are published
• Itemized billing: Monthly bills must include opening and closing meter readings, identification of all rate tiers and quantities, and a format consistent with what the utility itself provides

Master Meter Rules: PUC 739.5 and Civil Code 1940.9

Many older apartment buildings in Sacramento and Roseville have master meters -- a single utility meter for the entire building. The landlord pays the utility bill and then recovers costs from tenants. Two key statutes govern this arrangement.

Civil Code 1940.9: Cross-Metered Units

If a tenant's individual meter serves areas outside their unit (a common problem in older buildings where wiring or plumbing was modified over the years), Civil Code 1940.9 requires the landlord to:

1. Disclose the condition before the tenancy begins or upon discovery
2. Reach a written agreement with the tenant for how the outside usage will be handled

If no written agreement exists, the landlord must either become the customer of record for the tenant's meter, or separately meter and pay for the areas outside the unit. Failure to comply allows the tenant to sue for reimbursement of all payments made for service to areas outside their dwelling.

This is more common than landlords think. We've seen it in Sacramento duplexes where a garage, outdoor lighting, or laundry room is wired to one unit's meter. If you manage rental properties in the Sacramento region, an electrical audit can prevent a costly surprise. For more on what landlords must maintain and repair, see our California landlord repair responsibilities guide.

PUC 739.5: Master Meter Billing Requirements

When you bill tenants for gas or electricity through a master meter with submeters, PUC 739.5 imposes four requirements:

1. Same-rate billing: Charge tenants at the residential rate the utility would charge them directly, not the commercial or master meter rate the landlord pays
2. Rebate distribution: Pass through any utility rebates to tenants based on their proportional consumption
3. Rate schedule transparency: Post current utility rate schedules in a common area or provide the utility's website URL
4. Itemized bills: Provide monthly itemized bills with meter readings and rate tier identification

The same-rate requirement is the one that trips up landlords most often. PG&E's master meter rate and its residential rate are different tariff structures. If you're charging tenants based on what PG&E charges you (the master meter rate), you may be overcharging. The correct rate is what PG&E would charge the tenant if they had a direct account.

AB 1248: What the Bill Would Change (and Where It Stands)

Assembly Bill 1248, introduced by Assembly Member Matt Haney in the 2025-2026 legislative session, is the most significant proposed change to California utility billing rules in years. Understanding what it would do -- and its current status -- helps landlords plan ahead.

What AB 1248 Would Prohibit

The bill's central provision: landlords would be prohibited from using RUBS to allocate, demand, or collect fees or charges from tenants, except for water and sewer service. That means RUBS for electricity, gas, trash, and other utilities would become illegal for new and existing tenancies.

Additional provisions include:

• Fee transparency: Landlords advertising rentals must include all mandatory fees (including estimated utility charges) in the listed rent price
• Prior bill disclosure: Prospective tenants must receive two prior utility bills and a clear explanation of any allocation formula before signing
• Unbundling restrictions: Services historically included in rent cannot be carved out and billed separately if the effect is to circumvent rent increase caps

Current Status: Two-Year Bill (Stalled)

AB 1248 passed the Assembly Housing and Community Development Committee with an 8-3 vote on April 22, 2025. However, on June 3, 2025, Assembly Member Haney moved the bill to the inactive file, making it a "two-year bill" in California legislative terminology.

The Apartment Association of Greater Los Angeles (AAGLA) claimed credit for stopping the bill's progress, along with other industry groups that opposed the restrictions.

What "two-year bill" means in practice: the bill can be revived in the 2026 legislative session without starting over, but many two-year bills either die or return in significantly amended form. However, given the AG's enforcement activity and the political momentum behind tenant protection legislation in California, some version of RUBS restrictions is likely to return.

Sacramento and Placer County Utility Cost Landscape

Understanding local utility costs matters because it determines how much is at stake in your billing method. In the Sacramento metro area, utility expenses represent a meaningful percentage of gross rent -- and that percentage is growing.

Current Utility Costs in the Sacramento Region

Average monthly utility costs in Sacramento are approximately $362 per household, covering electricity, water, sewer, and trash, according to Utility Rates data for 2026. That breaks down roughly as follows for a typical 2-bedroom rental:

• Electricity (PG&E/SMUD): $140-$180/month depending on season and usage
• Water: $47-$65/month (Sacramento Suburban Water District base rates increased 5% for 2025-2026)
• Sewer: $35-$50/month (Sacramento Area Sewer District residential rates)
• Trash: $30-$45/month (varies by hauler and jurisdiction)
• Gas (PG&E): $40-$80/month depending on season

In Roseville and Placer County, water costs tend to run slightly higher due to the tiered rate structures used by Placer County Water Agency and the City of Roseville utilities department. A Roseville rental with landscaping can easily see water bills of $80-$120/month during summer.

Why These Numbers Matter for Billing Method Selection

If you're absorbing $350+/month in utility costs on a property renting for $2,200, utilities represent 16% of gross rent. At that level, passing utility costs through to tenants can add $200-$300/month to your effective NOI. That's a significant number -- $2,400-$3,600 annually per unit. When making capital investment decisions about submetering vs. RUBS vs. absorbing costs, that annual figure is what justifies the $300-$800 per unit cost of submeter installation.

For a deep dive into running the numbers on your rental property, see our rental property bookkeeping guide for California landlords.

Utility Billing Method Comparison for Landlords

Choosing the right billing method depends on your property type, unit count, meter configuration, and risk tolerance. Here's how the three methods compare across the factors that matter most to Sacramento-area landlords.

The conservation angle matters beyond just fairness. Sacramento's water conservation mandates continue to tighten. Properties with submeters or direct meters give tenants a financial incentive to conserve, which can reduce your overall water bill by 15-25% compared to RUBS, according to estimates from American Submetering. That savings often pays for submeter installation within 2-3 years.

How to Audit Your Utility Billing for Compliance

Whether you use RUBS, submetering, or a mix, running a compliance audit protects you from enforcement actions and tenant disputes. Here's a step-by-step process.

Step 1: Identify Your Meter Configuration

For each property, document:

• Which utilities are individually metered (tenant has direct utility account)
• Which utilities use a master meter (landlord is customer of record)
• Whether any submeters are installed (and their condition)
• Whether any meters serve areas outside the tenant's unit (cross-metering under Civil Code 1940.9)

Step 2: Review Your Billing Method Against Legal Requirements

For each utility type, verify compliance:

• RUBS: Are you passing through only actual costs? Is your formula documented in the lease? Are you charging any administrative fees on top of actual utility costs? Have you switched from included-in-rent to RUBS billing -- and if so, did you account for it as a rent increase under AB 1482?
• Submetering (water): Are meters calibrated and tested per county DWM requirements? Is your admin fee within the $4.75 cap? Did you provide required pre-lease disclosures?
• Master meter (gas/electric): Are you charging the residential rate (not the master meter rate)? Are you providing itemized bills? Is the current rate schedule posted?

Step 3: Audit Your Lease Language

Pull your current lease and check for:

• A specific clause describing which utilities are included in rent and which are billed separately
• The billing method for each separately-billed utility (RUBS formula or submeter)
• Required disclosures for submetered properties
• Any language that could be interpreted as requiring electronic-only payment for utility charges (prohibited under Civil Code 1947.3, the same rule that applies to rent -- see our rent collection best practices guide)

Step 4: Compare Total Collected vs. Total Billed

Pull 12 months of utility bills for each master-metered property. Compare the total amount billed to tenants against the total utility cost. If the amount collected exceeds the actual utility cost -- even by a small margin -- you have a compliance problem. Account for vacancy months, common area usage, and any billing company fees to make sure the math works.

Lease Language: What Every Utility Clause Needs

Your lease is your first line of defense in any utility billing dispute. Vague or missing utility provisions create legal exposure. Every California residential lease should address utilities with these specific elements.

Required Elements of a Utility Billing Lease Clause

1. Identification of each utility: List water, sewer, electricity, gas, trash, and any others individually. For each one, state whether it is included in rent, billed directly by the utility to the tenant, or billed by the landlord
2. Billing method: If the landlord bills for a utility, specify whether billing is based on submetering, RUBS, or another allocation method. If RUBS, describe the formula (square footage, occupant count, etc.)
3. Frequency and timing: State how often utility charges are billed (monthly, quarterly) and when payment is due
4. Estimated cost: For submetered water, you must provide a written estimate before lease signing (Civil Code 1954.204). For RUBS, providing estimates is a best practice that reduces disputes
5. No-profit disclosure: State that utility charges reflect actual costs only and that the landlord does not profit from utility billing
6. Administrative fees: If an admin fee is charged, state the amount and confirm it's within legal limits ($4.75/month cap for submetered water)

For a complete lease template covering all required California provisions, see our California lease agreement guide.

A Scenario: How Vague Language Creates Problems

A Sacramento landlord's lease says: "Tenant is responsible for water and sewer." No billing method is specified. No formula is described. The landlord uses RUBS and bills $85/month. The tenant moves out and requests an accounting, discovering that the landlord's water bill for the 4-unit building averaged $220/month -- meaning the landlord collected $340/month from four tenants ($85 x 4) while the actual bill was $220. The $120/month difference funded common area irrigation and a carport wash station.

This is a violation. Common area usage cannot be passed through to tenants via RUBS unless the lease specifically addresses it and the allocation formula accounts for it. The landlord faces potential reimbursement claims from all four tenants for the duration of their tenancies, plus attorneys' fees if the tenants prevail.

Frequently Asked Questions

Next Steps: Getting Your Utility Billing Right

California's utility billing landscape is shifting. Between the Attorney General's enforcement actions, AB 1248's likely return, and rising utility costs across the Sacramento region, landlords who wait to address compliance gaps are taking on unnecessary risk.

Here's the priority order:

1. Audit your current billing. Use the 4-step process above to identify any property where you're collecting more than actual utility costs, missing required disclosures, or using a billing method without proper lease documentation
2. Update your lease language. Every lease should specify the billing method, utility-by-utility, with the required disclosures for your method
3. Evaluate submetering. For master-metered properties currently on RUBS, get quotes for submeter installation. The $300-$800/unit investment typically pays for itself within 2-3 years through reduced total utility costs (conservation incentive) and lower legal risk
4. Track the legislation. Watch for AB 1248 or successor bills in the 2026 session. The California Apartment Association and local apartment associations publish legislative tracking updates

If you're an accidental landlord who inherited a rental with a utility billing setup you don't fully understand, or if you're buying a multifamily property and need to evaluate the existing billing structure, a utility billing audit should be one of your first due diligence steps. For landlords renting out a home for the first time in the Roseville area, our guide to renting out your house in Roseville covers utility setup as part of the full preparation checklist.

Managing utility billing compliance across multiple properties takes ongoing attention. Lifetime Property Management handles utility billing setup, lease compliance, and tenant communication for landlords across Roseville, Sacramento, and Placer County. Contact us to discuss your properties and current billing setup.