What are your embedded energy network obligations?

Many strata managers and bodies corporate are not aware of the legal and financial ramifications when using embedded energy networks, according to Altogether Group.

Embedded energy networks are typically used in sites such as apartment blocks, retirement villages or shopping centres, to enable owners to separately sell and bill energy to all of the tenants or residents based there.

A key benefit is the ability to aggregate their building’s electricity usage to source cheaper, bulk pricing for their residents and common areas.

The owner of the embedded network is usually the body corporate and is commonly referred to as an “exempt seller” in an energy context because they do not need to become authorised by the Australian Energy Regulator as energy retailers. This is the case because the activity of on-selling energy is incidental, ie, not their main activity. The AER oversees and enforces the Exemption Scheme, and those who operate under it are subject to a range of obligations — although they are exempt from broader obligations that are normally required of an authorised energy retailer that sells energy as its main business.

In most cases, energy arrangements are managed by bodies corporate (or by the strata manager they engage), who choose to either run their embedded network under an arrangement with an authorised energy retailer or, more commonly, via a billing agent operating under the Exemption Scheme. However, there are key differences between having a billing agent manage an embedded network under an exemption scheme versus an authorised energy retailer.

Drew McKillican, Executive Manager of Energy Services at Altogether Group, said it is important for strata managers and bodies corporate to understand the legal and financial ramifications of using the two types of arrangements.

“Many strata managers or body corporates are not aware that retail offerings and billing agency arrangements under the Exemption Scheme are vastly different in terms of liabilities and responsibilities under the National Electricity Retail Rules (NERR) and the Australian Energy Regulator (AER) rules and guidelines,” McKillican said.

“All energy consumers must always retain their customer rights and protections, however the reality under the two arrangements can differ significantly in terms of having proper access to those rights. Many owners of embedded networks wrongly assume that they are not responsible for the delivery of key consumer protections under an exempt seller arrangement, which means their operation of the embedded network may not be compliant, leaving them vulnerable to financial and legal risk.”

Under exempt seller schemes, bodies corporate are still responsible for many financial and legal aspects including gate meter retailer costs, regulated fines, ombudsman costs and the debt risk of unpaid bills, which could potentially be quite substantial. Furthermore, they still have important liabilities in relation to capturing and declaring data for life support customers and assisting those who experience difficulties paying their energy bill. Many bodies corporate are simply not aware of their responsibilities and that can land them in trouble with the regulator, or with customers who complain that their rights and protections are not being fulfilled.

Conversely, all of these concerns are taken care of when under a retail offering. Access is granted to all the protections that retailers are obliged to provide under the National Energy Retail Law and National Energy Retail Rules, and much of the liability and compliance obligations therein shift directly to the retailer, and away from the body corporate.

“Energy is such a complex and evolving landscape. Changing legislative requirements make compliant operations of embedded electrical services in strata communities very difficult to deliver and maintain. Under a retail model we find that our customers appreciate knowing that all of these responsibilities are handled by us, giving them time to focus on their areas of proficiency, rather than trying to be experts in energy law and regulation,” McKillican said.

“While most embedded energy networks still currently use exempt seller schemes, this is likely to be influenced by legacy arrangements or a lack of awareness about the obligations involved. Yet, continuing an arrangement with an exempt seller while not being across all of the regulation and responsibilities that carries is likely to not be in the interest of strata communities.

“My prediction is that it is not likely to be long before compliance around embedded energy networks becomes increasingly enforced. In fact, we are already seeing the regulator tighter their scrutiny in this area.”

Three tips for reviewing your embedded energy network arrangement

1. Consider what matters most to your community in terms of their energy services. This will largely depend on the composition of your building — do you have a high proportion of owner occupiers, or frequently changing tenants for example? Do you have vulnerable residents who may need help understanding their energy bills or have special needs such as life support arrangements which are dependent on electricity supply to operate? Characteristics like this can complicate your ability as a body corporate to recover energy costs from residents and compliantly operate your network, and therefore your exposure to financial and legal risk and your admin burden could be increased.
2. Understand your obligations as an Exempt Seller and whether they are currently being met. Refer to the AER’s Exemption Guide: AER (Retail) Exemption Guideline Version 5.
3. Get advice on where you currently stand. Organisations such as Altogether Group can help to navigate your obligations and understand them better, as well as assess whether the current arrangement is fit for purpose.

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