Apartments locked into higher power bills after developers partner with retailers
Developers are making savings on key infrastructure and passing on costs to apartment residents by locking them into higher rates with energy retailers.
An estimated 95,400 households are within electricity-embedded networks and another 64,000 in hot water-embedded networks in NSW – an increase of over 900 per cent over a decade – where a retailer builds and owns apartment infrastructures to supply gas, electricity or hot water.
A parliamentary report released late last year found in some cases, customers were paying more than double what their neighbours’ bills were and faced hurdles, fees and ongoing costs if they attempted to switch providers.
While Victoria has banned embedded network contracts except in some cases, the NSW government has yet to fully implement recommendations from two separate reports which outlined the state’s “outdated” regulation.
Al Graham has paid upward of $200 a month in peak fares due to the building’s embedded contract with energy company Origin.Credit: Kate Geraghty
“What’s been allowed to proliferate is becoming commercialised nonsense.”
Strata Lawyer David Bannerman
Principal of Sydney strata law firm Bannerman Lawyers David Bannerman said embedded network contracts were extending into “phenomenal” things including solar, air conditioning, potable water, hot and chilled water, internet access, stormwater and waste removal systems, with retailers offering to build the infrastructure for free or cheaply.
“People think that they’re buying an apartment and all the facilities that go with it … but the bottom line is the developer’s project cost is cut because they never paid for things that were necessary,” Bannerman said.
“What’s been allowed to proliferate is becoming commercialised nonsense.”
Embedded networks can allow for cheaper wholesale prices by purchasing energy for the whole building, a 2021 strata scheme report found, however, these savings are generally passed on to the developer.
It is rare for an owner’s corporation to vote against the energy provision contract during its first annual general meeting.
Liberal MP Ray Williams was the chair of a NSW legislative assembly committee into embedded energy networks and said nothing had changed since the committee released its report in November last year.
“When buyers sign a tenant agreement, it signs up them up basically for life to pay for that service. They get an almost eternal contract. It’s an absolute rort and one that’s been exploited,” he said.
A major issue, he said, was large apartment blocks installing communal hot water systems with individual meters, causing extra fees – with some residents in his Kellyville electorate charged $555 per month for hot water alone.
“These guys are extortionists, they’ve created this false market to charge another cost to apartment owners.”
The sale of hot water is not regulated in NSW, while those on un-metered gas in embedded networks cannot receive NSW rebates and concessions and do not have access to external dispute resolution with limited pricing controls.
Strata scheme-embedded energy networks are also exempt from the three-year statutory limit on utility supply contracts.
Liberal MP Ray Williams chaired a committee into embedded networks which released its report last year.Credit: Peter Rae
Energy and Water Ombudsman NSW Janine Young said her hands were tied due to limited regulation.
“EWON has identified this growing issue through our casework, but we do not have the ability to address the regulatory imbalances without support from government and policymakers,” she said.
“Current regulations haven’t caught up with emerging energy technologies and business models.”
Al Graham was charged an average of $50 a month for hot water in the last quarter, and last year his monthly electricity bills climbed to over $200 for his two-bedroom apartment in Hornsby.
Graham lives in specialist disability accommodation and has a fixed income through the disability support pension, and his struggling to afford the bills.
According to the government’s energy comparison site, with a different provider Al could be saving 25 per cent.
But his mother, Penny, said it’s logistically near-impossible to change providers: “You have to convince another provider to come and put in the smart meter, and there are ongoing fees for using the infrastructure.”
A spokesperson for Origin Energy said supply charges differed across customer type, while regulations required buildings to provide easy access to gas meters, resulting in one master meter and un-metered gas bills.
Hot water costs were based on usage and fees to cover, Origin’s other costs include the costs of supplying, maintaining and reading hot water meters.
The spokesperson said it was their intention for embedded network customers to be paying less than the default market offer for the energy bill, including usage and supply charges.
The previous government pledged to introduce regulations, including maximum prices for water, reviewing electricity prices and setting three-year term limits, and reviewing whether new hot and chilled water embedded networks should be banned.
NSW Energy Minister Penny Sharpe referred questions to the Department of Planning and Environment.
A spokesperson said the NSW Independent Pricing and Regulatory Tribunal is expected to begin its review into appropriate price protections for electricity, gas, and hot or chilled water within embedded networks in NSW “shortly”.
“The NSW government also notes the recommendations of the final report of the NSW Legislative Assembly Inquiry into Embedded Networks with many of the recommendations reflecting the existing and future work programs of the NSW government and national bodies on embedded networks,” the spokesperson said.
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