Insights

Guide for customers of Electrical Embedded Networks

17 January 2018

In an earlier insight posts we’ve described what an electrical embedded network is (Link to Post), and we talked about the advantages (Link to post). Most of these have looked at the technical process and the advantages to the multi-tenant residential, shopping centres, industrial and commercial complexes that install electrical embedded networks.

In our post (link to Advantages of an Embedded Network) we described what we believe should be the advantage to occupiers in an electrical embedded network be they owners or tenants.  The key advantage that your electrical embedded network should provide is a competitive market rate for the electricity you consume in your residence or business. Sometimes it’s not that easy and whilst it should be, occasionally there are some very good reasons why your pricing can be off market.

Today we want to provide a guide to what it means to be a customer in an embedded network.

For most customers in an embedded network, the relationship you have, the service you receive and the price you pay should really be no different from that you would receive from a traditional retailer in the open market. In a presentation at Utilities Week in 2016, the NSW Energy Ombudsman advised that the average Australian electricity consumer interacts with their electricity retailer for less than 8 minutes per year. In a state where quarterly billing is still most common, this means that most of us spend less than two minutes a quarter looking at our bills and arranging to pay them.

As long as the supply is constant (which relates more to generation and distribution than it does to retail) and the bill is in line with previous months or quarters, most of us don’t think too much about it. In today’s very volatile electricity market, the cost of electricity in general may put electricity top of mind a little more often, but when it comes to our own bills, if we are priced in line with the market we tend to move on. We’re not necessarily happy about what we pay, but we move on.

This should be exactly the relationship you have in an embedded network. You receive your electricity supply; your meter is read and you are billed for the amount of electricity you consumed in the prior billing period.

So how is it different then?

Well, the biggest difference is the way your building complex has its electricity supply metered. In an embedded network, the total supply for your building or complex is received at one single point. That point is known as a Gate Meter or Parent Meter. That meter is part of, and visible to, the electricity grid. Behind that point is a network of private metering attached to your apartment and all others that measures your consumption.

Generally, these meters are the same as those that you would find attached to a free-standing house or an apartment that was not an embedded network, with the one main difference being that they are not visible to the electricity grid.

This is because the embedded network is a private network and no longer part of the distribution network that sits outside the Gate Meter.

Your Embedded Network Operator or ENO (companies like Energy On who operate the network and provide the billing) is required under federal and state regulations to manage your electricity supply in the same manner as a traditional retailer would. Your rights and your responsibilities are the same.

Well, that doesn’t sound so bad.

And yet there are lots of complaints about embedded networks. And a lot of these have to do with price and choice. And, in many instances, this is a fair point.

Let’s talk about price.

Your ENO should be looking to price your electricity in line with the market. You should not be disadvantaged just because you are in an embedded network. What’s more, because the energy from the grid that is supplied to the Gate Meter is generally contracted for long periods (12 – 36 months), it should be possible for your ENO to manage your pricing with minimal increases, as they are less subject to the market fluctuations than traditional retailers. Traditional retailers, even when you are on a contract, are generally entitled to raise your price at any time. On average, you should be less subject to this fluctuation than you would be with a traditional retailer.

Unfortunately, sometimes the wholesale market goes up and the retail market does not move for several months afterwards. This can occasionally place pressure on the embedded network and for a period your pricing may be out of market, but this should only be short term.  By the same token, if pricing goes the other way, you are more likely to benefit more quickly than you would in the traditional market.

In an embedded network, it is also more likely that the rate you receive will not be subject to a requirement to pay on time by direct debit from a savings account or credit card.

Hint: When looking to compare electricity pricing, ignore the size of the percentage discounts offered by retailers and look at the actual cost. It is not uncommon for quoted discounts to be from a much higher “Standing Offer” than the market standard. In Victoria for example, the Victorian Government mandated a system where in each distribution area there is a Retailer of Last Resort or ROLR. This is who you would turn to if your electricity retailer could no longer supply you. The Standing Offer of the ROLR is the highest amount that a retailer is entitled to charge.

But why can’t I change?

Well, technically you can. It’s just a little more difficult to do when you are in an embedded network and that is why it is important that your ENO ensures you are not disadvantaged.

In a non-embedded network, all the meters are visible to the grid and if you want to change retailers, you choose a new one and Bob’s your uncle. They do the work, you get a final bill from your current retailer and then all your new bills from the new one.

In an embedded network the private metering arrangement means that your meter is not able to be read by another retailer. This means that you would need a new meter and this would need to be supplied by your new retailer and it is very likely that they would charge for this and the cost would make it impossible for you to save money.

You will also likely end up with 2 bills; 1 for the energy only from your retailer of choice and 1 from your ENO for the network charges. Remember, all electricity bills are made up of a combination of energy charges and network charges. If your ENO is smart, they will do an analysis of all the costs and savings and work with you to reach an acceptable outcome.

Also, if you are a tenant, the private metering is often owned by the Owners Corporation or Body Corporate and you may need permission to make a change and you may have to restore when you move out.

Nobody really likes all this difficulty and there are some regulatory changes underway that will look to simplify this process, but if your ENO is smart and wants to continue to deliver all the benefits of the network, they should make sure that you are fairly priced to the market. We’ll be writing a post on these changes when they are clearer.

If your electrical embedded network isn’t delivering similarly, perhaps it’s time to think about alternatives?