Embedded Electricity Networks

What is an Embedded Electricity Network?

An embedded electricity network is a private electricity network that operates within a building or complex, such as an apartment, where the property is under the management of an Owners Corporation (formerly known as a body corporate). Rather than each unit or tenant purchasing electricity directly from a retail provider, the building as a whole buys power from a single retailer or, in some cases, a wholesale provider. The electricity is then distributed to individual residents or tenants through the embedded network.

Embedded networks offer various benefits, such as bulk buying power, which theoretically allows residents to access electricity at lower rates. They also simplify administrative processes, as one party—the Owners Corporation or a third-party operator—oversees the purchasing and distribution of power. However, these networks can create challenges for residents, particularly when it comes to choice and transparency about pricing.

Key Features of Embedded Networks:

– Centralised power purchase: The Owners Corporation or a specialised service provider negotiates a bulk electricity rate for the entire property.

– Sub-metering: Each individual apartment or commercial space has a sub-meter to measure consumption, and residents are billed based on their usage.

– Single point of supply: The entire building has one electricity connection to the grid via the Gate meter, but power is distributed internally.

Who Sets Up Embedded Networks?

Embedded networks are generally established by developers during the construction phase of a building. They may choose to install an embedded network as part of their overall infrastructure to provide a competitive advantage when marketing the property. Developers are often motivated by the potential for a more efficient utility service and by the possibility of securing more favourable electricity rates for future occupants. More realistically though the benefit for the developer is they do not have the pay for the installation of the electrical network in the building as its commonly funded by the Embedded Network Operator, such as Origin Energy, who have over time bought up a significant portion of the Embedded Network Operators across the country.

Once the building is completed and residents move in, the responsibility for managing the embedded network typically transfers to the Owners Corporation, or a contracted third-party energy management company (such as Origin). These entities handle the ongoing administration of the network, including billing, maintenance, and liaising with energy providers. Such contracts can be for long periods of time (e.g. 20 -30 yrs) to allow for the Embedded Network Operator to recover their costs from the initial installation.

Role of the Owners Corporation:

– Ongoing management: After developers set up the network, it falls under the Owners Corporation’s management, which ensures that electricity services are provided to the residents and that the necessary billing and infrastructure upkeep is conducted. This is often contracted to a third party at the conception of the Owners Corporation by the Developer when they still own all Lots within the scheme.

– Outsourcing management: The Owners Corporation must appoint a Embedded Network Manager (ENM) to handle the technical and administrative aspects of the network, including compliance with energy regulations and to assist Lot owners when they wish to be removed from the network.

How Do Embedded Networks Work?

In an embedded network, electricity is purchased by the Owners Corporation or an external service provider in bulk from an energy retailer. The electricity flows into the building through a main connection (the gate meter), and from there, it is distributed to each individual residence or commercial unit via sub-meters.

Step-by-Step Breakdown:

1. Bulk Purchase: The embedded network operator negotiates a bulk electricity contract with an energy retailer. This rate is typically lower than individual market rates because of the volume of electricity being purchased.

2. Distribution: Electricity is supplied to the building via a central meter or connection point. Within the building, sub-meters are installed for each apartment or tenant to measure individual consumption.

3. Billing: Residents are charged for their electricity usage based on their sub-meter readings. The rate residents pay might be higher than the wholesale rate due to additional costs, such as network maintenance and administration fees.

4. Regulatory Oversight: Embedded Network Managers (ENMs) must be appointed to facilitate access to energy choice and oversee compliance with industry regulations.

Benefits of Embedded Networks:

– Potential cost savings: Bulk purchasing often results in lower rates compared to individual retail pricing.

– Simplified administration: The Owners Corporation or network operator handles all aspects of energy procurement and billing, reducing administrative complexity for residents.

– Sustainability options: Embedded networks may facilitate the integration of renewable energy solutions such as solar panels or energy storage, reducing reliance on the grid and promoting sustainability.

Challenges with Embedded Networks

While embedded networks may seem beneficial at first glance, there are notable downsides that can affect residents. Chief among them is the limited choice of electricity retailer. Since the embedded network supplies the entire building, individual residents typically cannot select their own energy provider, at least not without going through a complex process.

Another challenge is the transparency of pricing. While the bulk rate might be lower than the standard retail rate, there are often additional charges (e.g., management fees, maintenance costs) that make it difficult to assess the true value of being part of an embedded network. Moreover, residents might not have access to the same range of deals or discounts offered by competing retailers outside the network.

Common Complaints:

– Lack of choice: Residents may feel trapped in the network with no option to switch to another provider.

– Inconsistent pricing: Despite promises of savings, some residents end up paying more due to the lack of competition.

– Difficulty in opting out: The process of leaving the network is often complicated and may involve significant costs.

How to Opt Out of an Embedded Network

In response to concerns about choice, regulatory changes in many jurisdictions now allow residents within an embedded network to opt out and choose their own electricity retailer. However, this is not always a straightforward process, and the decision to leave an embedded network should be carefully considered.

Steps to Opt Out:

1. Request an exit: Contact the embedded network operator (usually the Owners Corporation or the third-party manager) to inform them of your desire to leave the network and switch to an independent electricity retailer.

2. Metering arrangements: You will need to arrange for a separate connection and a new meter to be installed by your chosen retailer. This may involve rewiring or other infrastructure changes.

3. Assess costs: The upfront cost of disconnecting from the embedded network and setting up a new connection can be significant. This includes fees for meter installation, connection to the grid, and potentially ongoing higher retail rates.

Is Opting Out Worth It?

While opting out can provide more flexibility and choice, the cost vs. benefit needs to be carefully weighed. The initial expenses for installation of new metering and connection, along with potential contractual exit fees, can outweigh any long-term savings from switching to a new retailer.

Furthermore, individual retail rates outside the embedded network may be higher than the bulk rate secured by the Owners Corporation. This means that residents who switch may end up paying more for their electricity in the long run.

Considerations Before Opting Out:

– Exit fees: Check if there are any exit fees or penalties for leaving the embedded network.

– Infrastructure costs: New metering and wiring costs can be substantial.

– Energy plan comparison: Compare the rates available from other retailers against your current embedded network pricing, taking into account all fees and charges.

In Summary

Embedded networks provide a streamlined, often cost-effective way of managing electricity in multi-occupancy buildings, but they also limit consumer choice. While residents can opt out and switch to an independent retailer, the process can be complex and costly. Whether it’s worth leaving the embedded network depends on individual circumstances, including the upfront costs of opting out and the long-term savings (or lack thereof) from switching to a different retailer.

Residents who are considering leaving their embedded network should carefully assess the financial and logistical implications before making a decision. For many, staying within the network may remain the most practical and economical option, despite the limitations it imposes on choice and flexibility.

Resources

Energy and Water Ombudsman Short Video

Essential Services Commission – Default Offers for Embedded Network Customers