Embedded Networks Victoria: Are You Overpaying for Electricity?

Victorian Apartment Owners Stuck in Costly Embedded Networks

A new study by the Victoria Energy Policy Centre has found that customers in apartment buildings in Victoria on embedded networks are paying up to $439 a year more than the best deal they could get if they were able to access the free market.

Put another way, the study, which was commissioned by the state government, found that a typical customer on an embedded network was paying 36 percent more than the best publicly-advertised deal.

How Embedded Networks Work (and Why They Often Don’t)

In an embedded network, the body corporate purchases electricity in bulk and then on-sells it to individual residents. While this should theoretically lead to lower prices, the reality is often quite different.

The problem starts at the development stage. Developers frequently opt for embedded networks to save on initial costs. They strike deals with private embedded network companies who install the electricity infrastructure in exchange for a long-term contract (typically 5 to 20 years). This arrangement benefits both the developer and the embedded network company, but often leaves residents footing the bill.

These long-term contracts can be incredibly one-sided, making it virtually impossible for the owners corporation to switch providers even if they find a better deal. Some embedded network companies even employ tiered pricing structures, charging higher rates for tenants and subsidizing the costs for owner-occupiers and common property areas. This means tenants end up unfairly shouldering the burden.

Restricting Solar and Missed Opportunities

Adding insult to injury, some embedded network agreements even restrict the owners corporation from installing solar panels. This is because the developer has granted the embedded network company exclusive rights to supply electricity to the building.

While the issue of embedded networks has been acknowledged, practical solutions remain elusive. Sarah McNamara, CEO of the Australian Energy Council, suggests residents negotiate with their providers, but the restrictive nature of these contracts makes this advice largely unhelpful.

Disappointingly, the Victorian government’s new draft Owners Corporation Bill fails to address this issue, despite a recent amendment to NSW strata legislation that seeks to regulate embedded networks. Hopefully, the findings of the Victoria Energy Policy Centre study will prompt the government to reconsider its position and take action to protect Victorian apartment owners from unfair electricity pricing.

If you would like further advice on body corporate management matters, Tom can be contacted by email at tom@stratatitlelawyers.com.au or by telephone +61 3 8680 2471 Strata Title Lawyers.