Just when we think it’s all over a brand new electricity conundrum pops up. This time the question is whether an operator can stop providing electricity to home owners through the embedded network, and effectively force those home owners to contract with a particular energy retailer. In three land lease communities that we are aware of, this exact situation has been unfolding.
It appears the operators of these communities no longer want to on-sell electricity. At least one operator has specifically cited the ‘Reckless’ method as being the reason. It is important to note that it was the Land Lease Industry Association who engaged and instructed the Energy Expert (Ms Petkovic) who came up with the ‘Reckless’ method when in our view there were alternative methods available that were far simpler and fairer to both parties.
Electricity pricing for people supplied through an embedded network is a long-standing contentious issue. Customers within embedded networks are rarely able to access retail energy markets and therefore unable to shop around for the best prices. Prior to the commencement of the Residential (Land Lease) Communities Act 2013 (RLLC Act) home owners in land lease communities could be charged the local standing offer rate (the highest rate anyone is charged in NSW) for usage, plus a service availability charge (SAC). The RLLC Act limits the charge to what the operator is charged by their retailer however, it wasn’t until the issue was litigated up to the Supreme Court of NSW that operators accepted that fact and the ‘Reckless’ method was born.
In the communities where operators have decided they no longer want to on-sell electricity they have given over their embedded networks to Hum Energy, an electricity retailer. Hum has written to each home owner and offered a Market Retail Energy Contract. The usage prices are lower than the standing offer rate but there is also a daily supply charge, leading to an average increase in energy charges of around $500 a year per household when compared to ‘Reckless’.
Home owners have been advised by Hum that if they do not sign the offered supply agreement they will be charged standing offer rates.
A number of home owners from these communities contacted other electricity retailers to seek a better deal, however no other retailer would agree to supply electricity through the embedded network. Home owners have effectively been moved from one monopoly to another.
Why can't home owners access the retail market?
In an embedded network electricity is supplied by an energy retailer to the ‘parent’ smart meter. It is then on-supplied through the network to a series of ‘child’ accumulation meters – the meters that measure the electricity used by home owners. These meters do not usually meet the required standards and are not registered with the National Metering Database, which is why energy retailers are unlikely to agree to supply. Home owners can go on to the energy market but this requires an Embedded Network Manager to be engaged, the meter to be upgraded and the site to be registered with the energy market. Not only is this quite a process it is likely the home owner will have to pay for the new meter and that could result in the loss of any benefit from lower priced electricity.
How can Hum supply electricity?
Hum is able to supply electricity through the embedded network because they are the account holder for the ‘parent’ meter. They have replaced the operator as the wholesale purchaser and supplier to the embedded network.
What about electricity charges?
The RLLC Act does not apply to the contracts between Hum Energy and home owners because Hum is an energy retailer. The Act only applies where the operator is on-selling electricity to home owners. Those home owners who are now supplied with electricity by Hum Energy have lost the benefit of the limits on charges provided through the Act.
Options for home owners
A number of home owners made complaints to the Energy and Water Ombudsman of NSW (EWON) about the transfer of their accounts to Hum Energy. EWON have been in discussion with NSW Fair Trading and they have determined that neither the operator nor Hum Energy have broken any rules or the law.
Many home owners do not want to sign with Hum and are resisting being transferred to the retailer. It is possible however that these home owners could have their supply disconnected unless a solution can be found.
The Tenants’ Union has been working alongside two Tenants’ Advice and Advocacy Services regarding options for home owners in this situation. At the time of going to print a number of home owners are considering applications to the NSW Civil and Administrative Tribunal (NCAT) and we are advising on those applications.
As stated in other articles, the review of the RLLC Act is due to commence at the end of the year and there is no doubt electricity charges will be a key area for review. The Tenants’ Union will be pressing for a simpler charging system that provides reasonable prices for home owners, discounted supply charges for inferior amperage (strength of electricity current) supply, and sufficient profit for operators to maintain the embedded network.
If you’re affected by this issue ensure you have your say in the review
This article was originally published in Outasite magazine, issue 6, August 2020.