Adding an accessory dwelling unit (ADU) to your property is one of the most effective ways to create long-term income and boost resale value.
One of the most important decisions you will make during planning is how to handle utilities. The way you set up electricity, water, gas, and sewer for your ADU will affect your upfront construction budget, your monthly cash flow, and even your tenant relationships.
In this guide, we walk through the three main options for ADU utilities in California: separate meters, submeters, and shared service so you can choose the configuration that best supports your goals.
Understanding Utility Setup Options for ADUs
When you add an ADU to a single family property, you typically have three paths for utilities:
- Separate meter
The ADU has its own utility meters (for example a dedicated electric meter and possibly separate water and gas meters). The utility company issues separate bills to the main home and the ADU. - Submetering
The property has one main utility meter that serves both the primary home and the ADU. You (the owner) install submeters on the ADU lines to track how much of the total usage belongs to that unit. You then bill the ADU tenant for their share based on the submeter readings. - Shared service (no submeter)
The ADU is tied into the existing utility lines for the main home, and there is only one meter for the whole property. You do not track usage per unit. Instead, you build utilities into the rent, or you use a flat agreed amount.
Each approach can work well in the right situation. The best choice depends on your budget, your long term plans for the property, and how you want to manage billing and maintenance.
Separate Meter: Pros, Cons, and When to Choose This Option
With a separate meter setup, your ADU functions more like a stand alone unit from a utility standpoint. The utility provider sets up a separate account, and your ADU tenant pays their own electric, gas, and sometimes water bills directly.
Advantages of separate meters
- Clear billing and responsibility
The tenant sees their own usage and pays the utility company directly. This keeps your rent structure simple and reduces disputes over high bills. - Encourages conservation
When tenants pay directly for utilities, they tend to be more mindful of usage. Over time, this can also reduce wear on equipment. - Helps with long term flexibility
If you plan to hold the property long term or sell to another investor, a separately metered ADU is often more attractive. Buyers know the utilities are cleanly divided from day one. - Useful for higher power needs
Some ADUs include EV chargers, electric heat pumps, full electric kitchens, or home offices that pull significant loads. A separate electric meter and dedicated service often make panel upgrades easier and more predictable.
Drawbacks of separate meters
- Higher upfront costs
Installing a separate electric meter and potentially separate water or gas meters almost always increases construction costs. You may need a larger service panel, trenching, and coordination with the utility company. - Additional permitting and utility coordination
Separate meters often require more detailed design, dedicated meter locations, and compliance with utility service manuals. This adds time to your permitting and build schedule. - Addressing and site constraints
In some cities, a separate meter is tied to a unique address and specific clearance requirements for meter locations. On tight urban lots, finding space that meets code and utility standards can be challenging.
When a separate meter makes sense
- You plan to rent the ADU long term and want clean, tenant paid utilities.
- Your ADU will have high energy usage, such as all electric systems or EV charging.
- You view the property as an investment and want a future buyer to see the ADU as a self contained rental.
- Your lot has enough space and access to accommodate additional meter locations without compromising design.
Submetering: How It Works and Its Benefits for Homeowners
Submetering is a middle ground between separate meters and fully shared service. You keep a single main meter for the property, but you install submeters on the lines that feed the ADU. Submeters can track electricity, water, or gas usage for that unit.
How submetering works in practice
- A licensed contractor installs submeters on the ADU branches of your electrical, water, or gas lines.
- The main utility meter still measures total property usage for billing by the utility company.
- Each month, you or your property manager read the submeters and calculate the ADU tenant’s share.
- You either add a utility charge to the rent or invoice the tenant separately, depending on your lease.
Advantages of submetering
- Lower utility installation costs
Because there is only one main meter, you typically avoid some of the utility company charges and infrastructure upgrades associated with separate metering. - Fairer cost allocation than shared service alone
Instead of guessing a flat fee, you bill the ADU tenant based on real usage. This helps avoid resentment from either party. - Supports conservation and transparency
Even though the bill flows through the owner, tenants can see their usage trends and understand what drives higher costs. - Flexible for multi unit properties
If you already have more than one unit on the property, submetering can be a practical way to allocate costs without a full service redesign.
Key considerations and compliance
California has state level rules governing master metered properties and submetering. Owners who bill tenants based on submeter readings must follow specific standards for meter accuracy, billing practices, and notice. Water submetering in new multifamily properties is also subject to state efficiency and billing requirements.
Because of this, submetering should always be designed and installed by qualified professionals, and your lease language should be carefully reviewed to reflect how you will bill tenants.
Shared Service: The Simplest Approach – Is It Right for You?
With a shared service setup, the ADU ties directly into the existing lines for the primary residence. There is only one electric, water, and gas meter for the entire property, and the utility company sends a single bill.
Advantages of shared service
- Lowest upfront cost
You avoid new meter fees and often avoid the most complex service upgrades. For many homeowners, this keeps ADU construction more affordable. - Simpler construction and faster permitting
Connecting the ADU to existing lines can streamline your design and inspection process, especially in jurisdictions where separate meters are optional. - Straightforward for family or short term use
If you plan to use the ADU for family members, a home office, or occasional guests, shared utilities are often perfectly adequate.
Drawbacks of shared service
- No visibility into separate usage
You cannot see how much of each bill is driven by the ADU. This makes it difficult to fairly allocate costs if you rent out the unit. - Potential for disputes with tenants
If you charge a flat amount for utilities and bills spike, tenants may feel they are overpaying while you may feel undercompensated. - Less attractive to some investors and buyers
Buyers who view the ADU primarily as a rental may prefer a property where utilities are already separated or submetered.
When shared service can still be a smart choice
- You are building the ADU primarily for multigenerational living rather than a pure investment.
- You are on a tight budget and want to maximize every dollar for finishes, structure, or square footage.
- You want to get the ADU built now and are open to adding submeters or exploring separate meters later.
Cost Comparison: Installation Expenses and Long-Term Savings
The right utility configuration balances upfront installation costs with operating costs and long term value.
Upfront installation
- Separate meters
Expect the highest upfront cost. You may pay for: - Utility company application and meter fees
- Service panel upgrades and larger feeders
- Trenching and conduit runs to the ADU
- Additional inspections and coordination
- Submetering
Typically mid range. You pay for: - Submeters and associated equipment
- Electrical or plumbing work to reroute and label lines
- Professional setup and testing
- Shared service
Generally the lowest upfront cost. You still need: - Properly sized panel and circuits
- Adequate water and gas line capacity
- Code compliant tie-ins to existing systems
Ongoing costs and savings
- Separate meters
Tenants pay utilities directly, which reduces your operating expenses but may slightly reduce what tenants are willing to pay in base rent. - Submetering
You are responsible for the main utility bill but can recover most or all of the ADU portion, provided your billing process is clear and compliant. - Shared service
You build utilities into the rent or charge a flat fee. This can be simpler but exposes you to more risk if usage is higher than expected.
Over the life of the property, the “cheapest” option is often the one that matches your leasing strategy. For a long term rental ADU, investing a bit more upfront in separate metering or high quality submetering can pay off in reduced headaches and clearer cash flow.
Zoning Laws and Local Regulations Impacting Your Decision
California state ADU law sets the broad framework for ADU development, but cities and counties control many of the details, including utility rules.
Key points to keep in mind:
- State law generally does not require separate meters for ADUs
In many parts of California, separate utility meters are optional rather than mandatory for detached or attached ADUs. However, utility companies may have their own policies that apply when you request new or upgraded service. - Local guidelines often clarify meter options
Some jurisdictions publish ADU guidelines that explicitly state that separate utility meters are not required, while also explaining how to request one if desired. - Utility service manuals matter
Electric and water providers often have separate technical manuals that describe when multiple meters are allowed, how many meters can serve one lot, and address requirements for metered units. - Submetering and billing practices are regulated
If you plan to bill tenants based on submeter readings, you must follow state rules on meter accuracy, tenant billing, and disclosure. Noncompliance can lead to disputes or regulatory issues.
Because local rules vary, it is essential to coordinate early with your designer, contractor, and the local building and utility departments. At FTR Renovation & Build, we start utility planning in the early design phase so you are not surprised by last minute requirements that affect cost or layout.
Selecting the Best Utility Setup for Your Property Goals and Budget
To choose the right configuration, start with a few practical questions:
- What is your primary goal for the ADU?
- Long term rental
- Housing for family
- Short term or flexible use
- How sensitive are you to upfront construction costs versus monthly operating costs?
- If budget is tight, shared service or basic submetering may make more sense.
- If you are focused on clean long term cash flow and property value, separate metering can be worth the investment.
- How comfortable are you managing utilities and billing?
- If you want minimal involvement, separate meters that let tenants pay utilities directly are often ideal.
- If you do not mind a bit of administration, submetering can strike a good balance.
- What do local rules and your specific utility providers allow or encourage?
- Some providers strongly recommend separate meters for new units.
- Others are more flexible as long as the panel and service are properly sized.
A design-build team that understands ADU codes, utility standards, and on-the-ground construction realities can help you run the numbers and select the configuration that supports both your current lifestyle and your long-term investment plan.
Making an Informed Choice on Utility Setup for Your ADU Project
Utility setup is not the flashiest part of an ADU project, but it is foundational to how your new unit will function and perform as an investment. Separate meters, submeters, and shared service each offer real advantages in the right context.
By weighing upfront costs, long term cash flow, regulatory requirements, and your goals for the property, you can choose a utility strategy that supports stable tenancies, clear billing, and strong resale value. With the right plan in place from the beginning, your ADU will be easier to manage and better positioned to deliver reliable income for years to come.