Embedded networks review by Victorian Government not comprehensive enough

The Victorian Government announced back in October 2018 an election commitment to ban embedded networks in new residential apartment buildings, with appropriate exemptions for buildings that use renewable energy microgrids to deliver low-cost renewable energy to apartment buildings.

The commitment was made in response to ongoing concerns that customers currently living in embedded networks pay higher prices and do not have access to the same level of consumer protections as other Victorians.

An Expert Panel was appointed and developed a comprehensive package of recommendations to the Victorian Government on how to best implement its commitment to ban embedded networks in new residential apartment buildings.

The government supported all of the panel’s recommendations.

This includes transitioning embedded networks into Victoria’s electricity licensing framework, which will ensure that consumers in both new and existing residential embedded networks will have the same retail market access, legal protections, and regulatory oversight as other Victorian consumers.

The first phase of reforms was completed with a new General Exemption Order (GEO) published on September 29, 2022. The revised GEO contains a new renewable energy condition which new residential embedded networks will need to meet to operate legally.

The second phase of reforms will improve outcomes for all customers living in embedded networks, including those in existing sites.

The Victorian Government supported the additional recommendations and will legislate further reforms through 2024 to introduce licensing, and to enhance consumer protections and provide access to competitive retail offers for all embedded network customers.

However, in the meantime much harm is still occurring in existing residential and commercial buildings where embedded network operators are flexing their muscles.

The fundamental issue is that the developers of these buildings permitted the network operators to install their electricity and water/gas infrastructure while the building was still being constructed.

Therefore, regardless of any reform, the equipment and infrastructure will always be owned by the network operator. If an owners’ corporation (OC) decides to switch providers, it will have to buy the equipment from the network operator.

In the meantime, of course, the network operator has depreciated its equipment, but then stands to make a profit on selling the equipment back to the OC.

This should never have been allowed to happen, and unfortunately it is nearly impossible to put the genie back into this particular bottle.

The other point is that embedded networks come in all types and varieties. For instance, a lot owner recently lost a case in November 2023 in relation to his building’s embedded internet network.

Mr Lieu, who lives in the Nightingale Village development in Brunswick, filed a claim seeking to have the embedded internet network installed by the developer to be classified as a lot owner service, and therefore payable by only those owners that use the internet service, and not all owners.

However, the company involved – Net 360 – had not only installed internet infrastructure but had also installed on behalf of the developer an interface nodule to operate the intercoms, vehicle entry gates, and “call to lift” buttons which were all typical common property services.

Therefore, the Victorian Civil and Administrative Tribunal (VCAT) had to conclude that all lot owners were liable to pay Net 360 the costs that the developer had committed them to paying when it signed the agreement while the building was still under the developers’ ownership.

Not fair for unit owners, but very profitable for developers and network operators. Further reform is still required. •