Victoria will ban private electricity networks in new apartment buildings in a bid to drive down soaring household energy bills and ensure residents are not trapped in expensive deals.
The Andrews government announced the ban – a pledge before the 2018 state election – on Tuesday following a recommendation from an expert advisory group.
Embedded power networks serve multiple customers and are common in multi-resident complexes like apartment blocks, some retirement homes, social housing and caravan parks. They have been criticised for acting as a barrier to residents sourcing a potentially cheaper energy deal.
Across Australia, about half a million people are believed to purchase energy through embedded networks, according to the Australian Energy Market Commission, but the real figure could be higher as there is no national database.
The Consumer Action Law Centre chief executive, Gerard Brody – who sat on the independent expert panel that recommended the networks be scrapped – said he hoped Victoria could set a model for other states and territories.
“This is a problem across all states so I hope the Victorian reform sets a good example for what might also apply nationally,” he told Guardian Australia.
In embedded networks, electrical wiring is arranged to allow owners to sell energy back to tenants by bulk-buying supply from a retailer or generating energy onsite.
Many sellers to embedded networks do not require authorisation from the Australian Energy Regulator (AER) and often fall outside the remit of energy consumer law.
Brody said unregulated embedded networks had allowed an unfair business model to develop.
“It removes consumer choice and customer protections and it allowed that industry to develop and gain strength which is why I think it’s taken so long to overturn,” he said.
“It’s a lesson in the regulation of consumer protections and the dangers in putting in exemptions because businesses will take advantage of these.”
The ban will take effect in January and allow limited exemptions for buildings that run on 100% renewable energy. Existing networks will be reformed to ensure households can access more competitive deals.
The state’s energy minister, Lily D’Ambrosio, said the ban would ensure the 140,000 Victorians powered by residential embedded networks had choice and could access competitive deals to help save on their power bills.
“All Victorians deserve to get the same competitive energy deals and have the same protections, driving down the cost of living when people need it most,” she said in a statement.
In New South Wales, a parliamentary inquiry is investigating embedded networks to help reform the system.
The government said a second phase of the embedded networks review would focus on determining a licensing regime for networks to ensure better consumer protections and access to competitive energy deals.
