New government price caps to force power bill cuts for apartment residents
Energy retailers will be forced to reduce electricity prices for Victorians who live in apartments or townhouses and are tied to whole-building contracts.
About 174,000 households and 20,000 small businesses are connected to “embedded networks,” a private energy network where a single supplier serves multiple properties, preventing customers from shopping around for better deals.
Victoria has banned developers from entering into built-net deals for most new flats in 2022 unless they meet renewable energy standards.
On Wednesday, the state government announced it would force retailers to reduce prices for existing onboard network customers; But some strata owners say existing agreements should be terminated early to avoid price gouging.
Energy Minister Lily D’Ambrosio has said that from July 1 next year, incumbent grid electricity and gas retailers will have to reduce their prices to match the cheapest market offers in Victoria.
“We know that people living in apartments, retirement homes and trailer parks should get cheaper energy bills by living on private embedded networks. That hasn’t happened,” D’Ambrosio said.
“Major energy retail companies… have actually grown increasingly larger with profits from households and small businesses connected to their embedded networks.”
Under the policy, households can save up to $250 a year and businesses can save up to $600 a year on their utility bills alone, D’Ambrosio said.
The new price caps will apply to both electricity and gas retailers. D’Ambrosio said electricity prices had been capped at the benchmark Victorian Default Offer price since 2019, saving households about $370 a year.
Adam Promnitz of the Strata Owners Association said a price cap policy would not solve the problems with embedded networks because of the difficulties governments face in setting and maintaining “market” pricing.
“This is a band-aid solution to a systemic problem that locks homeowners into second-class citizens and unable to access the same consumer choices as all other Victorians,” he said.
Promnitz said Victoria should phase out or shorten existing onboard network contracts, some of which are 25 years old.
“The main problem is that they have a monopoly and can blackmail the owners for decades,” he said.
Promnitz noted that the new price cap policy would not apply to other costs faced by owners and tenants in some buildings, such as charges per liter for hot water usage. Tenants in particular are renting apartments without realizing they may be paying $50 to $100 more a month for utilities than they expected, he said.
Victoria’s energy price regulator, the Essential Services Commission, announced over the weekend that the default electricity price for residential properties will be reduced by an average of 5 per cent in the next financial year due to reduced environmental, network and wholesale electricity costs.
The Energy Council of Australia, which represents energy retailers, and the Property Council, which represents developers, declined to comment.
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Patrick Hatch is a transport correspondent for The Age and a former business correspondent.Connect with: X or email.
