Government’s new legislation to ban embedded networks a welcome move

Victorian Energy Minister Lily D’Ambrosio has announced a ban on developers entering into embedded network agreements in new residential apartment buildings, in a move that has been welcomed by owners’ corporations (OCs) all over Melbourne.

The ban will take effect in January 2023 and will only apply to new apartment buildings completed after that date.

However, in welcome news the Victorian Labor government is also working with stakeholders to develop consumer protections for Victorians currently stuck and suffering in a building with embedded network contracts. Some suggested protections would be to permit an OC to forcibly bring such contracts to an end, and to enforce a buyback clause for the infrastructure for a reasonable price.

With soaring energy costs across the East coast of Australia, this move is welcomed. Power bills costs are tipped to increase by hundreds of dollars this year and next, as the fallout from Putin’s war in Ukraine worsens a global energy crisis.

An expert panel heard from a large number of frustrated apartment dwellers that reported feeling “trapped” in an uncompetitive and overpriced energy arrangement with their embedded network provider.

There are an estimated 140,000 Victorians living in a building with an embedded network.

Some embedded network contracts “lock” in the residents and prevent them from transferring or changing their account to a different provider, and therefore, deny consumers the choice of reducing their energy bills.

While there are some good embedded network operators out there that source competitive pricing and pass on dividends to the OC and provide discounts, this new legislation will act to stamp out the cowboy operators that were taking their pound of flesh from frustrated Victorian apartment residents.

The ban on new apartment buildings being outfitted with embedded networks will reduce the profits of these operators and will make their business model harder to sustain.

But the sting in the tail may be that embedded network operators might seek to offset their reduced “new business” uptake by increasing the prices of their existing customer base to compensate themselves.

This is one reason why it is of crucial importance for the Victorian government to not delay with the second stage of reforms, so that apartment owners and residents will not have to suffer those increased energy prices for years and years to come.

The sooner that the Victorian Government can introduce legislation so that OCs can pass resolutions to forcibly end the embedded network agreements, the better off consumers will be.

The Energy and Water Ombudsman Victoria (EWOV) will no doubt play an increased role in assisting consumers with exiting from their embedded network agreements. •