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Owners’ Corporation Law - February 2018

05 Feb 2018

The great energy rort

By Tom Bacon

As Melbourne swelters through another hot summer which has everyone reaching for the air conditioner remote control, a great scandal for owners’ corporations (OCs) simmers amid the whirrs and buzzes of the cooling towers on the rooftops.

The cost of electricity is skyrocketing around the country. I know – my electricity bills have gone up by almost 100 per cent in the past 18 months.

But imagine not being in control of your own energy futures? Imagine not having the freedom of choice to select your own electricity provider? Imagine being locked in to an uncompetitive long-term electricity contract where you have to pay a price determined not by the market, but by the electricity company itself? Imagine being denied the opportunity to take advantage of new government regulations in the energy sector to provide you with freedom of choice? Imagine being denied the opportunity to “go green” in your building by installing solar or batteries and other forms of renewable energy and to take advantage of lower electricity costs?

This is the depressing reality for hundreds of large apartment buildings and commercial office blocks in Victoria.

A long-standing practice of developers has been for them to avoid having to pay for the costs of installing common property electricity infrastructure and meters by entering into agreements at construction stage with electricity companies whereby the company will install the infrastructure on behalf of the developer in return for lucrative long-term bulk energy contracts being signed by the developer on behalf of the new OC.

These contracts make it clear that the electricity company owns the meters and gets to decide the price of electricity that it will charge the building and residents. It also gets to charge administration fees on top of the electricity costs. It gets even worse when OCs find out that the electricity company retains ownership of the common property meters – meaning that if the contract is ever terminated, it gets to remove the equipment at the OC’s cost.

Developers and electricity companies have been getting away with this rort for years and the galling part about it is that the Victorian Government and the Commonwealth energy regulator are absolutely silent about doing anything to curb this industry practice.

Then there are those developers that decide to convert the rooftops of buildings into lots and “airspace lots” and retain ownership for themselves. The purpose of this enterprise is to then enter into lucrative long-form leases with telecommunication companies and billboard companies and earn passive income from the rooftop.

If the rooftops are not within an OC’s possession, committees are not able to take advantage of recent technological advancements in solar power and are unable to install the infrastructure that would cut the cost of electricity in the building, which leads to less reliance on the already over-supplied national electricity grid.

The solution is simple: Firstly, ban developers from being able to “sell off” essential services such as electricity meters and gas meters at construction stage. Something as critical as electricity supply should always be common property and in the control of the OC itself.

Secondly, insert one small amendment into the Subdivision Act 1988 to render the rooftop and airspace inalienable – meaning the rooftop and airspace must remain as common property.

These two simple reforms should take the Victorian Government a little under 10 minutes to draft the required legislation, but its effect would be to safeguard the renewable energy futures of thousands if not hundreds of thousands of Victorians in the future.

However, with 1400 apartment buildings and commercial buildings set to be built in Melbourne in the next five years, there’s no time to lose. For each new building that’s in the process of being completed, I’ll wager $5 that its energy future has already been corrupted.

The buzz around government circles is that this is a legitimate industry and that government doesn’t want to prevent builders and developers from going about their business and making profits for fear that developers will move to other markets.

Once again, vested interests win out and reasonable and sensible consumer protection policies are ignored.

Here’s another wager: I’ll give $10 to anyone who wants to bet that I’m wrong that the government does anything about the great energy rort in Victoria …

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