Light at the end of the tunnel?

Electricity charges in land lease communities

The long-running dispute over electricity charges in land lease communities continues. Just over 12 months ago we became aware of, and reported on, operators relinquishing their right to on-sell electricity to home owners and passing that responsibility to Hum Energy, or another energy retailer. At that time the Energy and Water Ombudsman of NSW (EWON) and NSW Fair Trading had both determined that neither the operator nor Hum Energy had broken any rules or laws regarding this arrangement. However, some home owners were resisting the transfer and the Tenants’ Union was working with Tenants Advice & Advocacy Services and the Tweed Residential Park Homeowners Association (TRPHA) regarding options for those home owners to resolve their disputes. We can now report on two developments.

Explicit Informed Consent

Along with EWON and NSW Fair Trading, the Australian Energy Regulator (AER) had been consulted about the arrangements between operators and Hum Energy and they could see nothing wrong either. However, when home owners took a stand and refused to sign contracts with Hum, and were subsequently threatened with disconnection of their supply, Sandy Gilbert from TRPHA went back to the AER with a new set of questions and issues.

One of the questions the Tenants’ Union had concerning Hum stepping into an operators’ shoes to supply home owners in an embedded network was regarding consent from home owners. It was our understanding that an energy retailer must obtain explicit informed consent (EIC) from a customer before they could become their retailer. EWON had determined that Hum became the ‘deemed’ supplier under these arrangements and could provide energy, bill home owners, and disconnect them if they didn’t pay. Sandy Gilbert put the question of consent to the AER when she met with them and they confirmed the position under the National Energy Retail Law, saying:

“An energy retailer must obtain your explicit and informed consent before creating an agreement for the sale of electricity.

When obtaining a customer’s consent, the National Energy Retail Law requires the consent to be both explicit and informed. The requirements are summarised as follows:

• A customer’s consent must be given either in writing, verbally or electronically.
• An energy retailer must maintain a record of each EIC provided by the customer, which includes information that will enable the AER to verify the retailer’s compliance with its EIC obligations.
• An energy retailer must produce a satisfactory record of the informed consent if a customer asserts that EIC was not obtained.

The National Energy Retail Rules includes a protection that prohibits a customer from being disconnected if the issue of whether the customer consented to the transfer remains unresolved.

If a retailer does not obtain a customer’s EIC to a transfer (which includes cases of customer transfers without consent) the transfer and the contract with the retailer is void.”

This clarification is heartening for Margaret Reckless (see this article) and other home owners who refused to sign contracts with Hum Energy or give their consent to be transferred. It confirms that operators cannot simply step out of supplying electricity to home owners and invite an energy retailer to take over the embedded network. Electricity charges for home owners on embedded networks are governed by the Residential (Land Lease) Communities Act but, if a home owner signs with an external energy retailer, they lose the benefit of that protection and charges may increase significantly.

A win at the Tribunal

The second development is that the NSW Civil and Administrative Tribunal (NCAT) has recently handed down a decision regarding an application by a home owner that the operator was breaching the site agreement by ceasing to supply electricity to the site. Ros Chapman (the home owner) sought orders that the operator recommence supply and pay compensation to her, or in the alternative that her site fees be reduced.

The operator outsourced the embedded network to Hum Energy in February 2020. This resulted in higher charges for Ros including a Daily Supply Charge of 151.25 cents per day.

The crux of the application to the Tribunal was that the site agreement contained terms that the operator was the supplier of electricity to the site and the home owner was to pay the operator for electricity used at the site. Ros argued that by withdrawing from being the electricity supplier the operator was in breach of the site agreement and was making an impermissible attempt to unilaterally vary the terms of the site agreement.

Ros further argued that electricity was a service the operator had contracted to provide and that they had withdrawn that service.

The Tribunal was satisfied that Ros’ site fees should be reduced. It found “a communal facility or service provided at the community when the agreement was entered into has been withdrawn or substantially reduced for the purposes of section 64 of the Act, by the operator ceasing to on-sell electricity to the home owner.” The Tribunal said that although the service had been replaced by a different service, the supply of electricity was on different terms. Those different terms included the new Daily Supply Charge, and the resulting increase  in electricity charges for the home owner.

The Tribunal determined that Ros’ site fees should be reduced by $10 per week, which is the approximate amount of additional electricity charges she has been paying since Hum started supplying her with electricity.

The site fee reduction was backdated to February 2020 and the operator was ordered to refund Ros the sum of $520. The site fee reduction will remain in place until a group application challenging a site fee increase is heard by the Tribunal. Ros’ site fees will be considered in the context of that application.

What will come out of the Act review?

As we mention in our article on the review of the Act (see this article), the Government will be fast-tracking changes to electricity charges for home owners on embedded networks. That work has already started and the Tenants’ Union, along with other key stakeholders, have been in discussion with the NSW Fair Trading Policy Team regarding how those charges should be calculated. We are hopeful that home owners will not have to wait too long for a more stable charging system that is fair to them and also to operators.

This article was published in Outasite magazine issue 7. Outasite is published annually. Outasite Lite email newsletter, is sent several times a year – subscribe here. All past issues are available in the archive.