What rate can a landlord legally charge for electricity?

Recovering a cost and making a sale are different things

When a building has one connection in the landlord's name and tenants are billed from sub-meters, the landlord is acting as a conduit. The distribution licensee sold the electricity; the landlord is splitting the bill and recovering what each tenant used.

That is lawful and ordinary. What changes its character is a markup. Charging a per-unit rate above what the supply cost is no longer cost recovery, it is selling electricity at a profit, and Section 12 of the Electricity Act, 2003 provides that no person shall transmit, distribute or undertake trading in electricity unless authorised by a licence under the Act or exempt under it. A landlord has no such licence.

So the practical rule is simple to state and widely ignored: you may recover what it cost you, apportioned fairly. You may not price it.

Why there is no single tariff rate to use

Domestic electricity tariffs in India are generally slabbed, with the rate per unit rising as monthly consumption increases, and the structure is set by each State Electricity Regulatory Commission rather than nationally. A bill also carries fixed or demand charges, duties and surcharges that are not per-unit at all.

This matters because a building on one connection consumes as a single large consumer. Its units land in higher slabs than any individual tenant's consumption would on its own, so there is no one rate that is obviously the right one to apply.

Picking the top slab rate over-recovers, because not every unit was charged at that rate. Picking the lowest slab under-recovers. The only figure that reflects what the electricity actually cost is the effective rate: the total bill divided by the total units it covers.

Working out the honest rate

A building whose monthly bill is ₹14,000 for 1,600 units, with four tenants on sub-meters and some common-area load.

Dividing the whole bill by the whole consumption means every charge on the bill, including fixed charges and duties, is apportioned in the same proportion as usage. Nobody pays a marked-up rate and the landlord recovers exactly what was paid, no more.

Common areas, and the units nobody metered

The sub-meter totals will almost never add up to the main meter. The difference is the staircase light, the water pump, the lift, cabling losses and whatever is wired outside the sub-metered circuits.

That gap has to go somewhere, and the fair treatment is to apportion it on a basis both sides can see: equally per unit of accommodation, or by occupancy, whichever the agreement states. What it must not become is an unexplained addition to each tenant's bill, because that is indistinguishable from a markup and will be read as one.

Say which method you use in the agreement, and show the gap as its own line on the bill rather than folding it into the per-unit rate.

What a tenant is entitled to ask for

None of this is unreasonable, and a landlord billing honestly loses nothing by providing it.

• A copy of the distribution licensee's bill for the building, for the period being charged.
• The opening and closing readings on their own sub-meter, with dates.
• The effective rate used, and how it was calculated.
• How common-area consumption was apportioned, and on what basis.
• The same figures in the same format each month, so that a change is visible.

If the rate looks wrong

Start by asking for the licensee's bill and the computation. A large share of these disputes are arithmetic rather than bad faith, and most landlords applying a flat ten rupees a unit have not thought of it as resale at all.

If it is not resolved, the routes available depend on your state and your facts. Electricity supply and tariffs are regulated by the State Electricity Regulatory Commission, and the distribution licensee is the body that can speak to what the connection is and what was billed. Overcharging has also been pursued as a consumer complaint on the footing that it is an unfair practice or a deficiency in service, though whether that route fits a landlord-tenant arrangement has not been uniform and is worth asking a lawyer about rather than assuming.

The more durable fix is structural. Where the load justifies it, a separate connection in the occupier's own name removes the question entirely, because the tenant is then billed by the licensee directly and no apportionment is needed. A distribution licensee supplies on application by the owner or occupier of premises, so a tenant can ask about a connection in their own name, though in practice the licensee will usually want the owner's consent and the premises to be separately wired.