Investor · All Over, NC · Member since 2016 · 70 posts · 14 votes
Hello, I'm hoping somebody can help me understand the laws regarding utility payments in North Carolina a little better. I recently bought some property there where I plan on building a duplex, possibly two or three of them.
As a completely separate investment, I want to install solar panels on the roof of the duplex. The idea is not to give free electricity to my tenants, but to use my roof as a space to earn additional income. Please let's not start another argument about whether solar energy is worth the investment or not.
The law in NC states that each unit needs to have it's own individually metered electric service from the utility, with the service in the name of the tenant. No submetering allowed. You can read the law here: http://www.ncleg.net/EnactedLegislation/Statutes/H...
It also says:
"The provisions of this section requiring that service and meters for each individual dwelling unit be in the name of the tenant or other occupant of the apartment or other dwelling unit shall not apply in either of the following circumstances:
(2) The tenant and landlord have agreed in the lease that the cost of the electric service or natural gas service or both shall be included in the rental payments and the service shall be in the name of the landlord."
I want the power service for each unit to be in my name. Then, each side of the duplex will have it's own separate net metering solar system which will basically turn the power meter backwards. I don't want to give the tenants credit for the solar energy, they didn't pay for the solar panels. I simply want to charge them the standard electric rate for what they actually used.
The only loophole I can find to allow me to do this is #2 posted above. If I include the cost of power with the rent, then the power service can remain in my name for each tenant. That way I would keep any solar credit.
The question is, if I do include the cost of power in the rent, is there any way for me to charge for it variably each month based on their actual usage? Or does it have to be just one flat rate? Could I charge something like an "amenities fee" in the amount of the power bill every month? Can it be a variable amount based on meter readings or does it have to be the same charge every month?
We did it this way- the bills with the utility were in our name. State requires that for houses with solar panels. For the first year, we forwarded the monthly bill to the tenants, they paid us their actual usage each month. Then we paid the utility. That averaged $45 per month. After the first year we factored that average usage into the rent. We haven't had to tweak it. We're in our 4th year now.
@Account Closed - Coming from someone who both owns rentals and has solar panels on my personal residence, I understand where you are coming from. Leaving the question about the return on the investment in solar alone, I think you might be trying to make the situation more difficult than it needs to be.
Are you installing the solar as an investment for you or are you doing so as a marketing/tenant attraction tool? If it is an investment for you, I'd find out the average utility bills for the property (or an equivalent property if it has not yet been built.) Example, if the average electric bill comes out to $60 a month then I would probably account for $70+ a month (chances are tenants will be turning down the AC if they are not directly paying) and just add it to the market rent rate. The difference in what the solar panels then generate is yours.
If you are trying to use it more as a marketing tool to attract an eco-conscience tenant, then I would take that same $70 and added it to the market rental rate and charge more since it is a "premium" rental. Then you can say that because of the solar panels the electric utility is "free".
Either way, you eliminate the extra work, hassle, and variability of charging different amounts each month.
Would it not be easier to keep them completely separate? Have tenets pay as usual. Then you can set up your mini power plant on their roof and collect all the profits.
If you charge the tenants for the power used you may be losing money and are over complicating the solar power investment.
You best option, if your utility provider offers the option, is to sell all the power generated back to the utility and have the property set up with meters for each tenant as normally found in a rental. You keep the income streams completely separate.
They pay their own hydro and you generate maximum return on your solar investment.
@Account Closed, I'm glad to hear you're doing this- I attempted something similar, but after reading "mixed" reviews about the top solar installers, I pulled the plug ;)
My plan was to charge a fixed rate for the electric usage(in other words, include it in the rent.) I think you should stick to a fixed number- billing them in different amounts each month seems like an administrative nightmare. Even if you could automate it, the tenants would feel like they were paying utilities when they're supposed to be included in the rent(and they'd be right!)
If you want to maximize profit, install fixtures which minimize electric usage. The easiest ones would be LED bulbs, which you've probably already done. You'll probably be paying for water, so I'd recommend a water-efficient toilet(Niagara makes a .8 gpf version which can be bought at Home Depot,) and showerheads that flow around 1.75 gpf also work pretty well. For sinks, any WaterSense fixture will work well. Even if you don't pay the water bill, you should install these anyway- your residents will save water and be able to pay the rent more easily. Even better, you can advertise the rentals as water and energy efficient, some people really dig that stuff. If you need links to any of the above, let me know and I'll put them in a future post.
We did it this way- the bills with the utility were in our name. State requires that for houses with solar panels. For the first year, we forwarded the monthly bill to the tenants, they paid us their actual usage each month. Then we paid the utility. That averaged $45 per month. After the first year we factored that average usage into the rent. We haven't had to tweak it. We're in our 4th year now.
Giving an unmetered utility just seems like a bad idea to me.
I understand the risk of having a flat rate on electricity and the desire to have an incentive for the tenant to conserve energy. Another way to approach it would to have a combined system. You could set it up in the lease that there is a flat rate on electricity in addition to rent. You can then have the incentive that any usage below that amount would be returned in the form of a refund (monthly? quarterly?). That way you have a set fee to list in a lease but can still give the tenants the motivation to save energy.
Just remember, anything more than a flat fee/rent amount will add complexity to the arrangement with the tenants and might require additional effort to educate and attract new tenants.
Would it not be easier to keep them completely separate? Have tenets pay as usual. Then you can set up your mini power plant on their roof and collect all the profits.
It's possible, but not profitable, at least not in my situation. If you use the "net metering" option, the utility pays you the same cost for power as they charge you, up to the total amount you used. Basically spinning the meter backwards. The residential rates in my area are around 11 cents per kilowatt hour.
If I let each tenant have their own service, and then a third service where I send power back from my solar panels, they only pay about half that rate. There is no usage on the third meter, so nothing to simply turn backwards, and the cost the power utility pays for this power is only about half of what they charge. In my area, I believe they only pay around 5 cents per kilowatt hour for surplus electricity under this type of setup.
Put some common area lighting for security onto that third meter and now you have the meter spinning backwards in daylight and then forward at night.
Hi @Account Closed may have the best idea. Put a lightbulb on it's own meter in front of the mailbox on a timer and cash the checks. Let the tenants pay their own from the utilities. That separates your two businesses.
You could ask your utility. I know that it's illegal here to profit from the utility, but you're just passing along costs. You get to keep the net metering.
Here's an example of our bill and email correspondence with our tenant this month. We keep the refund for the 118K returned to the grid. Our Enphase Enlighten gives us the gross production. Two units share the electric. $45 monthly average is folded into the rent of unit 1, unit 2 pays the amount over $45 each month until we figure out the average for her unit. I make sure to point out the daytime usage (the tenant's benefit that's already factored into the rent).
Hi (tenant),
This month $68.30 - $45 = $23.30 118 kWh returned to grid, 262 kWh gross production so 144 kWh free!
-(landlords)
tenant wrote back: " Let the sun shine!!! That is just so cool. Makes me happy every time I see how much has gone back to the grid I know you must feel good about it"
Hello, I'm hoping somebody can help me understand the laws regarding utility payments in North Carolina a little better. I recently bought some property there where I plan on building a duplex, possibly two or three of them.
As a completely separate investment, I want to install solar panels on the roof of the duplex. The idea is not to give free electricity to my tenants, but to use my roof as a space to earn additional income. Please let's not start another argument about whether solar energy is worth the investment or not.
The law in NC states that each unit needs to have it's own individually metered electric service from the utility, with the service in the name of the tenant. No submetering allowed. You can read the law here: http://www.ncleg.net/EnactedLegislation/Statutes/H...
It also says:
"The provisions of this section requiring that service and meters for each individual dwelling unit be in the name of the tenant or other occupant of the apartment or other dwelling unit shall not apply in either of the following circumstances:
(2) The tenant and landlord have agreed in the lease that the cost of the electric service or natural gas service or both shall be included in the rental payments and the service shall be in the name of the landlord."
I want the power service for each unit to be in my name. Then, each side of the duplex will have it's own separate net metering solar system which will basically turn the power meter backwards. I don't want to give the tenants credit for the solar energy, they didn't pay for the solar panels. I simply want to charge them the standard electric rate for what they actually used.
The only loophole I can find to allow me to do this is #2 posted above. If I include the cost of power with the rent, then the power service can remain in my name for each tenant. That way I would keep any solar credit.
The question is, if I do include the cost of power in the rent, is there any way for me to charge for it variably each month based on their actual usage? Or does it have to be just one flat rate? Could I charge something like an "amenities fee" in the amount of the power bill every month? Can it be a variable amount based on meter readings or does it have to be the same charge every month?
I know, this post is in response to this OLD POST from "Account Closed" who is the Original Poster (OP). The OP doesn't have a full grasp of the Utility Franchise. My post is just to provide non-legal, legislative clarity, in case someone else in BP Nation thinks the OP had a good idea for implementation in NC.
The OP post details putting solar panels on a rental and charging the tenant for electric usage that the OP contemplates "Producing, generating," and further contemplates "delivering or furnishing electricity,... for the production of light, heat or power ... for compensation." I note that the generation is not for "a person's own use" in this context, since the tenant uses the produced electricity, not the property owner.
Given the above paragraph, by definition the OP is operating as a utility, per § NCGS 62-3 (23) a.1. Definitions. I am familiar with this section of the General Statutes, having sold electricity for many years via two LLCs, one a solar development company and one as a property owner. Both of my operations are exempt from utility regulations under NC General Statutes. In the case of the solar farm, I am covered under PPA and IA with a regulated utility. In the case of residential rental property, the exemption afforded to landlords is detailed in Article 6 in Chapter 62, Public Utilities. Article 6, The Utility Franchise article, (emphasis in bold is mine) "allow a lessor of any leased residential premises, as that term is defined under G.S. 42-59(3), that has individually metered units for electric service in the lessor's name to charge for the actual costs of providing electric service to each lessee. The following provisions shall apply to the charges authorized under this subsection:" The GS goes on to identify HOW (the terms) exempt electricity resale occurs. The governing principle is, throughout the Utility Franchise in North Carolina, that exempt resale activity involves "actual cost" or "actual amount". The OP didn't identify the applicable rated service provision, but I'd bet it was under a solar Net Metering provision. I think it would be a stretch for the OP to claim an "actual cost" of electricity above the purchased electricity cost. For 20+ years I provided electric service 'at cost' to tenants and was challenged (as part of eviction judgements) in two court cases by tenants. I won both cases.
Bottom line: don't violate state laws. If you want revenue from solar, invest in a solar (or similarly, wind) farm. At least you'll have the opportunity for the 30% tax credit, unlike solar on a rental. There are plenty of exemptions to selling electricity, like exemptions for HOAs, towns, campgrounds, marinas, etc., but they must charge "no more than the actual cost of the electricity supplied." per NCGS 62.3 (25) h.