Embedded network reforms are due later this year, but many NSW apartment residents currently pay too much for their electricity and hot water.For most NSW residents, electricity and gas services are provided by a retailer with certain provisions to ensure that they are not charged an unreasonable amount and that they can find a new provider if they are dissatisfied with their service. However, for many residents of new apartment buildings, residential land lease communities and retirement villages in so-called ‘embedded networks’, these laws are still catching up.
What is an embedded network?
Most households in NSW, whether they are freestanding homes, apartments or townhouses, are connected directly to the state’s electricity and gas networks with a meter that measures the amount of electricity or gas consumed by the household. To receive energy to their homes, residents sign up with an energy retailer, who in turn purchases energy from energy generators. These households are referred to as ‘on-market’.
Unlike individually connected households, an embedded network is an arrangement where a group of residences are linked to the grid with a single connection point. A property owner or manager then buys energy in bulk from either a generator or a retailer (or generates it onsite with rooftop solar), then resells it to individual residents who are metered separately. These embedded network operators often have fewer obligations than standard retailers. In addition, while ‘on-market’ retailers may try to reduce the rate they charge to households or provide deals to encourage new customers, embedded network operators have no such incentive because they cannot simply sign on new customers outside of their networks.
Many property developers opt to build apartment blocks as embedded networks because embedded network companies often make deals to provide cheaper infrastructure in exchange for a network contract with the new blocks once they’re completed.
However, because this deal is made before a anyone moves in, future residents have no control over the terms of the contract or the prices they may have to pay for energy. In the case of one property in Southwest Sydney, a 10-year contract for electricity, gas and hot water was signed by the building’s strata manager before the first owners meeting even took place.
What is being done?
After unfair conditions for embedded network customers came to light in Victoria, the Victorian Government banned embedded networks in new apartment buildings with only a few exemptions. The NSW Government has made no such promise, but it has called for a review into embedded networks as part of an ‘action plan’ to close the gaps in consumer protections afforded to embedded network customers. This review was completed last year by the Independent Pricing and Regulatory Tribunal (IPART). CPSA made a submission to IPART’s review calling for NSW to follow Victoria’s lead in banning new embedded networks. CPSA also called for embedded network prices to be pegged to the lowest rates paid by on-market customers to overcome the lack of price competition faced by embedded network operators.
While IPART’s review did not recommend that new networks be banned, it did advise the NSW Government to implement a stricter pricing system to protect customers from unfairly high costs.
The NSW Government is expected to implement changes to the laws governing embedded networks later this year. These changes will mean that embedded network contracts will be limited to 3 years. IPART’s recommendations around maximum prices are still being considered by the Government, but a rule change last year implemented a lower maximum price for customers in residential land lease communities, so here’s hoping the Government extends these protections to all embedded network customers.
For most NSW residents, electricity and gas services are provided by a retailer with certain provisions to ensure that they are not charged an unreasonable amount and that they can find a new provider if they are dissatisfied with their service. However, for many residents of new apartment buildings, residential land lease communities and retirement villages in so-called ‘embedded networks’, these laws are still catching up.
What is an embedded network?
Most households in NSW, whether they are freestanding homes, apartments or townhouses, are connected directly to the state’s electricity and gas networks with a meter that measures the amount of electricity or gas consumed by the household. To receive energy to their homes, residents sign up with an energy retailer, who in turn purchases energy from energy generators. These households are referred to as ‘on-market’.
Unlike individually connected households, an embedded network is an arrangement where a group of residences are linked to the grid with a single connection point. A property owner or manager then buys energy in bulk from either a generator or a retailer (or generates it onsite with rooftop solar), then resells it to individual residents who are metered separately. These embedded network operators often have fewer obligations than standard retailers. In addition, while ‘on-market’ retailers may try to reduce the rate they charge to households or provide deals to encourage new customers, embedded network operators have no such incentive because they cannot simply sign on new customers outside of their networks.
Many property developers opt to build apartment blocks as embedded networks because embedded network companies often make deals to provide cheaper infrastructure in exchange for a network contract with the new blocks once they’re completed.
However, because this deal is made before a anyone moves in, future residents have no control over the terms of the contract or the prices they may have to pay for energy. In the case of one property in Southwest Sydney, a 10-year contract for electricity, gas and hot water was signed by the building’s strata manager before the first owners meeting even took place.
What is being done?
After unfair conditions for embedded network customers came to light in Victoria, the Victorian Government banned embedded networks in new apartment buildings with only a few exemptions. The NSW Government has made no such promise, but it has called for a review into embedded networks as part of an ‘action plan’ to close the gaps in consumer protections afforded to embedded network customers. This review was completed last year by the Independent Pricing and Regulatory Tribunal (IPART). CPSA made a submission to IPART’s review calling for NSW to follow Victoria’s lead in banning new embedded networks. CPSA also called for embedded network prices to be pegged to the lowest rates paid by on-market customers to overcome the lack of price competition faced by embedded network operators.
While IPART’s review did not recommend that new networks be banned, it did advise the NSW Government to implement a stricter pricing system to protect customers from unfairly high costs.
The NSW Government is expected to implement changes to the laws governing embedded networks later this year. These changes will mean that embedded network contracts will be limited to 3 years. IPART’s recommendations around maximum prices are still being considered by the Government, but a rule change last year implemented a lower maximum price for customers in residential land lease communities, so here’s hoping the Government extends these protections to all embedded network customers.
