Monday, December 18, 2017

Absolutely essential fact your body corporate needs to know

What I am writing about, no-one really knows. Even though it was announced back in 2012.

I certainly know that body corporate managers and committees don’t need a single extra agenda item to worry about.  Unfortunately, the Australian Electricity Market Commission (AEMC) and the Australian Energy Regulator (AER) don’t think this is the case.

These regulatory bodies have gone about introducing an adjustment fundamental to the way electricity is managed inside an embedded network (commonly known as bulk electricity) and are hanging enforcement and non-adherence on the shoulders of the body corporate. The body corporate, for the most part, are not current stakeholders in the regulatory framework and these changes are what have been promoted in the media as the ‘Power of Choice’.  The manner in which this new legislation has been communicated with all stakeholders including body corporates has been very strange and done in a relatively poor way.

The AEMC ‘Power of Choice’ reforms bring about the requirement for the appointment of an embedded network manager or ENM, which will allow consumers being supplied electricity by the body corporate inside an embedded network access to choose their own electricity supplier. A choice that must be made available to any consumer who wishes this access, these changes have been gazetted by the Queensland state government and will become effective on December 1, 2017.

Ramler Connect Chair Mid Article
Why are these changes occurring in the first place?  As part of what has been called ‘Power of Choice’ reforms are about ensuring the level of service and features in the consumer retail experience are competitive.  Price is a factor but not the primary driver as within a residential embedded network, a consumer almost always receives rates better than any market retail offer that can be obtained.  This is purely due to the network structure that makes an embedded network viable in the first place.

Where the responsibility has become clouded is around ‘who’ is responsible. Let’s start this with the body corporate. The new rules are clear and say that a body corporate must appoint an ENM when required or become an ENM themselves.  This is quite contradictory in application as becoming an ENM is a very costly and stringent process with significant monitoring and ongoing cost, definitely not something that one would expect residential bodies corporate to have an appetite for.  However, if the body corporate did become an ENM, they would be responsible. Without the body corporate ‘becoming’ an ENM the only obligation for them is to ‘appoint’ an ENM. Let me unpack ‘appoint’ as this should not be confused with ‘engage’ to provide services, rather engage an ENM for the ENM to provide services, nuanced but clearly different in responsibility. It should not be perceived as the ENM acting as a service provider to the body corporate, because they do not. Any ENM has somewhat fiduciary obligations to the consumers within an embedded network to facilitate their ‘Power of Choice’.

The only obligation of the body corporate is to ‘appoint’ an ENM… that is it!  The function of an ENM does not provide service to the body corporate, it facilitates the aforementioned choice for the consumers.  There is, in effect, no variance between ENM providers, other than the commercial offering they may charge for said appointment. The rules are very clear that an ENM should not and cannot pay for or provide benefit to a body corporate for their appointment (AER Guideline Exemption from registration as a network service provider, 4.7.1.1b), which will guard against an existing billing provider mixing or subsidising the appointment for service.

The regime for accreditation to become an ENM is done by an AEMO (Australian Energy Market Operator), which requires adherence to strict processes and ongoing compliance that includes a rigorous audit program. The specialised functional capabilities and competencies need to fit into a highly regulated space; in effect, becoming an energy market contributor.

Currently, AEMO has not released a list of accredited embedded network managers.  This reflects on the poor way the legislation has been communicated. It also means that the time between having an ENM available and requiring one is coming down to the smallest of windows. To date, neither the AER or AEMO have released any guidance on the implementation and enforcement of the legislation which will come into effect on December 1, 2017.

As it so happens, there are always those ahead of the bell curve, prospective ENM companies that are advanced enough in application that they can offer ENM appointment to body corporates so they can clear any concerns or any obligations come December 1. Ultimately, this leaves a body corporate with a simple solution: appoint an ENM.

About Ben Chester

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