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Strata Managed Embedded Networks: The Model in Crisis

An embedded network is collection of private electricity meters that sit behind a single connection to the local electricity grid of a multi-lot building, such as an apartment block or office complex.

In an embedded network the building will receive one electricity bill for the entire site, and building occupants are ‘on-billed’ based on their private sub-metered usage via Strata or a third party Embedded Network Operator.

In this blog, we will explore the challenges faced by strata-managed embedded networks and how they may be struggling to maintain profits in the current market.

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The Price Disparity Predicament

One of the key issues impacting strata-managed embedded networks is the price disparity between wholesale market pricing and the rates charged to residents. While residents are generally charged at the Synergy A1 rate or even lower, the master meter, which is typically contestable, is exposed to wholesale market pricing. Since 2020, wholesale electricity prices have surged by 68%, whereas the Synergy A1 home plan tariff has only increased by 6.9%. This significant gap in pricing is eroding the profit margin for embedded networks.

Rising Tariffs and Regulatory Changes

Adding to the financial strain, Western Power network tariffs are also steadily increasing, with a projected average annual increase of 7.5% from July 2023 onwards. Moreover, impending regulatory changes are expected to increase compliance costs for embedded network operators. Energy Policy WA is considering the inclusion of embedded networks under the Alternative Electricity Service (AES) regulatory framework. This would necessitate operators to provide additional customer protections, including billing and metering requirements, information provision, price regulation, disconnection policies, hardship assistance, and dispute resolution procedures.

The EV Charging Challenge

The emergence of electric vehicle (EV) charging infrastructure poses yet another financial hurdle for embedded networks. The increased electricity demand from EV chargers can lead to spikes in supply costs, potentially jeopardising their financial viability. Many strata committees lack the necessary understanding and expertise to effectively manage the load associated with EV chargers, exacerbating the financial risks.

Operational Inefficiencies and Financial Opacity

Strata-managed embedded networks often face operational inefficiencies, such as expensive meter reading fees and a lack of data reconciliation. These factors make it challenging for strata committees to accurately determine whether they are operating at a profit or incurring losses.

Finding Financial Clarity and Considering Alternatives

Given the challenges outlined above, it is imperative for residents and strata committees to evaluate the financial viability of their embedded networks. Understanding the pricing disparities, regulatory changes, compliance costs, and the potential impact of EV chargers is crucial in making informed decisions.

If it becomes evident that your embedded network is not financially viable or lacks the expertise needed to optimise costs, it may be worth considering a switch to a specialist embedded network operator such as Bright Connect. We have the knowledge and resources to navigate the complexities of the market, alleviating the burden from Strata.

If you would like Bright Connect to provide a free profitability assessment on your embedded network, please get in touch.