ESC Guide to embedded networks

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The Essential Services Commision of Victoria has published a variety of resources for operators of embedded networks on its website including a guide to exempt providers obligations within Victoria and a range of other material designed to assist exempt operators in meeting their obligations.

An embedded network is a privately owned electricity network that is not part of the National Electricity Market. Electricity sold within an embedded network is typically purchased at a parent connection point and then distributed to those customers within the embedded network usually through child connection points. Embedded networks are typically found in apartment buildings, shopping centres, airports, caravan parks, retirement or lifestyle villages, and land lease parks.

In Victoria, a business is required to hold a licence to supply or sell electricity pursuant to section 16 of the Electricity Industry Act or an exemption pursuant to section 17.

Many activities are covered by the General Exemption Order. The General Exemption Order operates to exempt certain activities from the requirement to hold a licence under section 16 of the Act. Exempt entities are still required to comply with a range of regulatory obligations both within the General Exemption Order and within associated regulatory documentation.

There are two categories of exemption provided for in the general exemption order. These are: deemed exemptions and registerable exemptions. Activities that are the subject of a deemed exemption do not require a licence nor do they require an application to be lodged with the commission for a registrable exemption. Deemed exemption activities include the sale of electricity to fewer than 10 small commercial or retail customers within the limits of a site that the exemption holder owns, occupies, or operates.

With there are two categories of registrable exemption that have been created for businesses engaged in an activity that involves all of the following: generation, distribution, and sale of electricity. The first typically involves solar power purchase agreements where a business provides, installs and maintains at no initial costs a solar PV system in exchange for an agreement from a customer to purchase electricity produced at an agreed price and for an agreed term. The second category typically consists of community energy projects under which a community group initiates, develops, and operates a renewable energy resource or energy efficiency initiative.

The phrase ‘own, occupies, or operators’ is one that is often discussed as it is used in both NECF and in Victoria albeit in different context. In the guideline, the commission notes that ownership or operation of an electricity network, or elements of a network, alone will not suffice to entitle the person to be covered by the general exemption order. This appears to be a much narrower interpretation than that taken by the Australian Energy Regulator.

We will publish additional material for our clients on the guideline and the accompanying material. You can access the ESC guideline here:

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