We have recently received multiple queries regarding proposed changes to the regulatory framework for embedded networks and fears that meters will need to be replaced at considerable cost. These queries have been received from committee members within strata buildings that purchase electricity in bulk and on sell to occupants passing on the savings they are able to negotiate with electricity retailers via tender.
In this article we set the record straight for all those committees that have previously decided to reduce their electricity costs for their residents by creating and maintaining control of their buildings embedded electricity network. We also bust the myths being circulated by unscrupulous operators that attempt to guide committees towards being locked in to a retailer agreement that takes over committee control of the buildings embedded network and ability to negotiate future supply rates on the basis that they will need to replace all meters.
The Australian Energy Market Commission’s Final Report on the embedded network changes and the transitional framework for legacy embedded networks is in section 9 and can be read in full here:
The transitional framework only applies to existing Registrable Exemptions (not deemed and individual exemptions). In summary, networks established prior to 1 December 2017 will:
- “Be required to comply with the arrangements for off-market retailers under the NERR (with those exempt sellers required to transition to the new framework within 2 years of the effective date), exempt from the metering provisions in Chapter 7 of the NER, but be required to comply with the AER’s pricing schedule which replicates the AER’s powers to impose conditions on exempt sellers with respect to prices to be charged to small customers, with the AER able to set applicable prices with a maximum price at the standing offer price of the local area retailer.
- Have network exemptions grandfathered into the new arrangements.” (emphasis added).
The relevant proposed new rule extracted is as follows:
11.117.10 Metering coordinator exemption for pre-2017 embedded networks
Clause 7.2.1(e) does not apply to a transitioned off-market retailer in relation to the sale of electricity to a retail customer at a connection point in a distribution system that:
(a) has an establishment date before 1 December 2017; and
(b) is owned, controlled or operated by an Exempt Embedded Network Service Provider under a legacy network exemption.
Summary: There is no requirement for bodies corporate holding registrable network exemptions to upgrade their metering infrastructure under the upcoming changes.
What does ‘grandfathering’ pre-December 2017 legacy embedded networks mean?
As above, there is currently no plan for networks established prior to 1 December 2017 to transition to the new framework. Subject to networks voluntarily opting in to the new framework, those networks will continue to operate under the existing ‘Power of Choice’ rules that have been in place for the last three years. This will continue indefinitely.
However, these pre-December 2017 legacy embedded networks will not be regulated under the current Network Service Provider Exemption Registration Guideline. Instead, they will be subject to a new guideline – Legacy Network Exemption Guideline.
The Legacy Network Exemption Guideline is yet to be developed, so it is unknown whether it will contain any requirements in respect of metering.
Summary: Unless bodies corporate ‘opt-in’ to the new framework, there is currently no plan to introduce rules requiring pre-December 2017 networks to upgrade their metering.
If you are approached by a retailer suggesting that you will be fined if you don’t upgrade your meters and that they will do this for your for free if you sign up with their services, ask the salesperson how much commission he will receive then make your choice about the offer being made. For more information on how to keep your embedded network under the control of the body corporate and not have a middle man slide in taking away your bulk purchase savings, please get in touch.
This article was contributed by Adam Ford, General Manager and Partner – ARC Utilities Management