I was like you as well before, finding sources of people that do room rentals but somehow there are not many around, at least when I am looking for them 10 years ago. I must say it is not a norm therefore the majority of people are not familiar with what is necessary to run a room rental business. I do recommend you to not be closed to this idea as it does work and the results are truly exceptionally good, the profits that is. Your cost on the council approvals sounds reasonable if you would like to add the additional rooms, it should be recovered back in a couple of months.

On your questions whether an agent would be willing to manage it for you, you would really have to check as I am not familiar with agents in your country. Since it is your first experience with room rentals, it may be wise to manage it yourself to get some experience before getting an agent as you would know the issues that may pop up and you would know how to manage it later on with the agent in the future especially when you got more rooms to manage. I am currently managing 35 rooms single handedly. It's a bit of work but still manageable with systems in place.

On your question on the utilities, you can actually either exclude or include it in the rental depending on several factors as tenants may find it convenient if included and if its excluded you may find it an administration nightmare. It would also matter if they use heaters and other electrical equipment in the house that takes a lot of electricity. Your suggestion of splitting the bills is also one option that is workable.

On money in advance in case they don't pay the bills, yes, I believe it's quite standard to collect utility deposits if you are getting them to pay the bills separately on top of the rentals. It is your house and you are the landlord so technically you can also draft your own tenancy agreement with this clauses in mind (do check with your agents on this) as we do this in Malaysia. I usually collect 1 month advance rental, 2 months deposits , key deposits and tenancy agreement fees, all this do increase your cash flow end of the day.

Hope that helps!