Review of Embedded Networks in Victoria

The Victorian Government (Government) is progressing on its 2018 election commitment to ban embedded networks in new residential apartment buildings, by releasing an Issues Paper to commence formal stakeholder consultation into this issue.

What is an embedded network?

Embedded networks are private electricity networks, where electricity is supplied to an area or building through a privately owned and managed supplier (and not a licenced retailer). As they fall outside the national energy market, concerns have been raised that customers living in embedded networks pay higher prices for electricity, and do not have access to competitive retail offers and adequate consumer protections.

Review into embedded networks

An expert panel is leading the review into embedded networks (Review) and has been tasked with developing recommendations to Government on how best to implement the ban (with appropriate exemptions for renewable energy microgrids). The Review’s primary focus will be to:

  1. place benefits to consumers at the centre;
  2. prioritise equitable pricing outcomes and consumer protections;
  3. future-proof the design of the system; and
  4. ensure that Victoria’s regulatory framework will mirror or enhance the national standards.

Issues Paper

To assist with the Review, an Issues Paper has been released. The Issues Paper defines its keys considerations as:

  1. ‘How to implement a ban on embedded networks in new residential apartment blocks, including appropriate exemptions to the ban for buildings that use renewable energy microgrids to deliver low-cost renewable energy to apartment blocks.
  2. How such a ban would intersect with legacy embedded networks in residential apartment blocks, including options for retrofitting or removing existing embedded network infrastructure if appropriate.
  3. How to ensure that, to the fullest extent practicable, Victorian consumers in residential embedded networks can access the same competitive retail offers and consumer protections as other consumers.’

Importantly, the Issues Paper seeks evidence-based submissions from stakeholders, including possible policy options that may be available to improve outcomes for consumers.

Submissions on the Issues Paper close at 5pm on 26 February 2021.

The Panel is expected to release a draft report for further consultation in June 2021 and a final report will be prepared for the Minister by October 2021.

Next steps

If you have any questions on the Review and Issues Paper, or would like assistance with making a submission, please phone, or email the key contacts below.

Jane Hodder
Jane Hodder
Partner, Real Estate, Melbourne
+61 3 9288 1692

David Sinn
David Sinn
Partner, Real Estate, Melbourne
+61 3 9288 1509

Changes to FIRB guidelines in relation to lease renewals

On 29 March 2020 monetary thresholds for acquisitions of leases of land of more than 5 years (including options to renew) by foreign persons were reduced to zero.  This meant that a large volume of leasing transactions which previously did not require approval fell into the Foreign Investment Review Board (FIRB) net.  On 3 September 2020, the FIRB amended these temporary measures to allow renewals and material variations of leases to proceed without approval in some circumstances. The new measures took effect on 4 September 2020.

What were the key changes?

In summary, the key changes were as follows:

  1. For the renewal or material variation of existing non-sensitive leasehold interests in developed commercial land (where the same acquirer held a substantially similar interest under a lease before 10:30pm on 29 March 2020), the previous monetary thresholds have been reinstated.
  2. The reinstated thresholds for the value of the leasehold interest being acquired (below which approval is no longer required) are set out in the table below:
Type of land Threshold – more than:
Land that is being acquired by a foreign person who is an agreement country or region investor $1,192 million
Land that is being acquired by any foreign person other than an agreement country or region investor, or a foreign government investor $275 million
Land that is being acquired by a foreign government investor $0

In this context, “renewal” means the extension of a lease through the exercise of an option to renew or the entering into of a new lease on substantially the same terms as the previous lease.  A “material variation” can include things like an extension of the term (including adding options) which can be regarded as a new lease for FIRB purposes.

  1. Certain transitional arrangements were introduced which govern the treatment of applications submitted under the regime before 3 September 2020 where such applications relate to actions which are no longer notifiable under the new rules set out above (such as withdrawal of applications and waiver or refund of application fees paid). We can provide guidance on this on a case by case basis if required.
  2. For all other leasehold acquisitions by a foreign person (where the term of the lease including options is reasonably likely to exceed 5 years) the $0 monetary screening threshold continues to apply and the acquisition of the leasehold interest will therefore need to be notified to the FIRB and approval obtained before the transaction proceeds.
  3. Examples of leasehold transactions still caught where the term is sufficiently long are an agreement for lease where the land is vacant at the time and a lease of developed commercial land which is regarded by FIRB as “sensitive” land.

Further information

For more information, the full FIRB guidance note 53 can be found here.

Contact Us

If you have any questions, please reach out to your HSF contact, who will be happy to discuss.