Questions and Answers about On-Supply of Electricity

Is On-Selling Electricity different in every state the simple answer is YES. Each state has its own rules and regulations yet NSW is probably the most difficult as in NSW the electricity act states to On Sell Electricity it has to be a Landlord – Tenant relationship, this excludes bodies corporate where there are owner occupiers.

In VIC and QLD the ability to On- Sell Electricity by bodies corporate has seen growth and opportunities for bodies corporate as the surplus in the bulk purchase price to the selling price can go back to the owners or tenants as reductions or reducing body corporate levies.

In VIC to On-Sell Electricity a body corporate can apply to the Essential Services Commission for an exemption so as to allow on-selling yet the owners/tenants still have the right to apply for separate supply so as to buy from their retailers of choice.

In QLD it is again different where no application has to be made yet the body corporate has to submit a form 21 listing Ambulance Levies payable to conform to the guidelines, also owners/tenants have the right to buy direct from their retailers of choice.

In this article the questions and answers are focused on the QLD market yet the questions answered will give you an insight into how the system works.

1. General Questions

Q. Will I save money by changing?

A. This is determined on a case by case basis. An assessment needs to be done on the site which is a detailed analysis of your current operations, profile and electricity usage to determine the profitability of the exercise. It is possible that your site may not benefit by moving to an on-supply arrangement, that is why is important to find out the profitability and return on investment for those wishing to go down this road.

Q. Who can establish and on-sell electricity in QLD?

A. The short answer is the On-Supplier - As determined by the Electricity Act 1994. The owner or occupier or user of premises becomes an 'on-supplier' who can supply and sell electricity to the occupants of the premises (the receivers). The legislation contains provisions that must be followed in the on-supply of this electricity to the receivers. Penalties of up to 5,000 penalty units may be applied where legislation is breached.

Examples of on-suppliers are shopping centre owners, caravan park owners, owners of blocks of flats and Bodies Corporate associated with blocks of residential or commercial units.

Q. What are the Advantages and Disadvantages to the tenants and body corporate wanting to On-Sell Electricity?

A. Advantages

• Cost reduction - electricity prices can be negotiated and a market rate obtained at a lower rate than that of a current market tariff rate. The average weighted cost of Electricity + Network and other charges is usually lower than the cost to a customer on Tariff.
• Protection - A lot owner or tenant cannot be charged any more than the current market gazetted tariff rate, so the owner or tenant is protected by this legislation under the electricity act.
• Surplus - A body corporate cannot make profit from the sale of electricity. Revenue generated (Surplus) can go back into reducing the common area electricity account which could reduce levies for all lot owners or it can go straight back as savings passed directly to the tenants as an additional discount on their electricity accounts (savings they probably would not achieve by negotiating with a retailer direct).
• Pricing Control - A body corporate can set the rate it wishes to charges lot owners or tenants as long as it is not higher than the current notified tariff (owners and tenants are protected by law). This means if the body corporate enters into a 3-5 year agreement with a retailer it will have some control over increases in pricing (excluding network and market charges, which are regulated); you can minimise the impact of any future electricity price increases that you would be subject to if on tariff.
• Pricing control can become a selling point for the building.
• You can outsource the billing provider to reduce risk however this is at an added cost.
• Easier management of electricity situations.
• Greater flexibility in opportunities to further reduce costs by introducing energy saving measures.
• Greater control of the building's electricity utility.

A. Disadvantages

• A body corporate can be fined if it does not adhere to the Electricity Act and relevant laws.
• Tenants have the option to go outside the arrangement and choose their own retailers.
• The difficulty in getting 100% of lot owners to agree.
• Once body corporate implements on-billing arrangements the only legal way to collect a debt from a tenant for unpaid energy accounts is through the lot owner, as it is the lot owner that the Body corporate has the agreement with and not the tenant. This can be overcome by collecting a bond from tenants.
• Implementing On-Billing can be difficult as it requires all lot owners to agree and there is a process to follow for implementation.
• There are capital costs upfront and ongoing costs that need to be considered, all these are should be outlined in the initial assessment to see if it is viable.
• Once you have made the decision to go contestable with a negotiated market contract you cannot go back to a tariff arrangement.
• The Body Corporate becomes liable for the sites electricity account, it will receive monthly accounts yet tenants generally receive quarterly accounts, outgoings to incomings can vary meaning a Body Corporate needs to hold the difference.

2. Connection, Supply and Negotiation of Electricity

Q. Who negotiates the electricity supply contract with the retailers?

A. A broker or the Body Corporate preferably someone with experience to ensure best possible market rate.

Q: Will there be a cost to individual lot owners to change over to the bulk electricity from individual accounts.

A : NO, yet there is a Body Corporate cost, yet a body corporate can redeem that cost via the electricity account in the form of a fee or by not passing on all savings when the accounts are issued until these upfront costs are paid back. It is important though to ensure at all times that charging rate does not exceed current Tariff Prices.

Q. Will I need a new meter if I switch to a different retailer?

A. YES, Specific interval meters are required when moving to the contestable market. It is recommended that you engage a qualified company to complete a site inspection to ascertain the requirements and any potential additional change over costs. You can buy new meters outright or purchase them from the network provider.

Q. Who owns the electrical reticulation assets such as the building main switchboard and unit meters?

A. In most cases the Body Corporate retains ownership of the modified switchboard. The bodies corporate can purchase the unit meters as new or request a quote from current provider to sell. It is normally more cost Effective to get a quote to buy the current meters in place.

Q. Will the reliability of my electricity supply change as a result of this conversion?

A. NO. The poles and wires supplying your building remain the property of the local electricity network provider and are maintained regularly. If there are any supply interruptions you simply call the same emergency number that you have used previously.

Q. Do I have to use the Body Corporate as my electricity supplier?

A. NO. Under the electricity Act you can elect to opt out yet this has to be agreed to before the motion is passed to move forward. The purchase of electricity from the body corporate should be clearly detailed in the by-laws for your building that formed part of your original purchase or lease agreement.

Q. How do I get connected if I am a new unit occupier?

A. You contact the current on-billing provider whom the bodies corporate appoint, obtain an initial read from the meter and set up your account. The current on billing provider details can be collected from your body corporate manager or on site manager.

Q. What will be the costs to the Body Corporate to change over to bulk electricity?

A. There will be costs to determine viability of the project, Implementation costs, changes to the switchboard, purchasing the current metering infrastructure and ongoing billing costs. This will be determined in a profitability exercise. Hence, determining the viability of moving forward is VERY important so you can determine return on investment and profitability.

3. Billing

Q. How is my electricity bill calculated?

A. This is determined by the bodies corporate yet the most common way is $/kWh rate that the body corporate pays for the building to your metered usage then add an administration charge as a separate line item to arrive at the legislated guaranteed level for supply of electricity to your building. There will continue to be separate meters for each unit, so the cost to each residential unit is based on the actual metered usage.

Q. What if my electricity bill looks too high or I have a billing enquiry?

A. The billing provider which your body corporate has appointed will be responsible for resolving the issue.

Q. What options do you have for paying the electricity bill?

A. It is up to the billing provider and their methods of payment.

Q. Are there any additional charges that I may or are likely to incur?

A. Yes. A reminder notice fee may be charged for overdue accounts. If you anticipate a problem, please contact the on-billing provider promptly to avoid any reminder fees and/or disconnection as a reconnection fee may be charged after disconnection for debt. A security deposit may also be required.

Q. Can I claim an electricity rebate?

A. Yes. You are entitled to an electricity rebate or concessions in Queensland if you hold one of the following current cards:

• PCC (Pensioner Concession Card)
• RHC (Repatriation Health Card)
• SC (Seniors Card Qld Government)

Q. How often will I receive my bill?

A. It is up to the body corporate, it is generally a quarterly basis if you are a residential customer. Commercial customers may receive their bills on a monthly basis.

Q. How long do I have to pay my bill?

A. That is a decision for your body corporate it is generally 14 days.

Q. What about my final bill/account?

A. If you wish to disconnect your service, the on-billing provider requires generally at least three business days notice and a forwarding address for your final account. If you do not give the required notice, you will remain responsible for the energy used (and for meeting any other customer obligations) until three business days after you give the required notice, or until a new customer has an account established in their name at the premises, whichever occurs first.

Q. How will an increase in tariff rates be determined?

A. Under this arrangement you will no longer be on tariff so your rates are set by the body corporate (they cannot be higher than the tariff rate set by the government at the time so you are protected by law).

There are always many questions when it comes to looking at this as an option. I hope this answers some of them.

Written by : Michael Newton Watt Utilities