Bodies corporate need to make sure they comply with the Electricity Act 1994 and the Body Corporate and Community Management Act 1997 ("the Act”) when on-charging owners for electricity. A recent adjudicator’s decision has clarified what section 196 of the Act and section 167 of the Accommodation Module mean and set out some important principles for bodies corporate to follow.
Essentially there are two different ways the body corporate can be involved in the supply of electricity (or other services) to lots.
The first is the situation dealt with in section 196 of the Act. This is where each lot owner purchases utility services directly from the service provider. The body corporate then agrees to take on liability on the owners’ behalf. The service provider is required by the Act to issue an invoice to the body corporate, which recovers the charges from the owners, and in turn pays the service provider. The amount the body corporate can recover is limited to the amount charged by the service provider. It can’t add on ancillary charges such as the cost of issuing invoices or a fee for providing or maintaining utility infrastructure. These must be paid for out of the admin fund.
The second situation is more common and usually called an ‘on-supply’ agreement. This involves the body corporate purchasing electricity in bulk (and therefore at a lower tariff) from a utility service provider and on-selling it to owners. This is permitted by s167 of the Accommodation Module (s129 of the Standard Module). The key points from the decision for on-supply agreements are:
- They’re optional for owners. Owners can’t be made to purchase their electricity from the body corporate, and a by-law that purports to bind successive owners to buy from the body corporate is void.
- The body corporate can only recover money from owners or occupiers who have signed an agreement with the body corporate agreeing to the on-supply arrangement.
- The agreement can allow recovery of amounts to cover administrative and maintenance costs. However the body corporate must not operate a business or make a profit.
- A by-law that makes an owner liable for non-payment by its tenant is void.
- A by-law that permits termination of supply for non-payment without notice is void.
Calypso Plaza on Coolangatta
Calypso Plaza on Coolangatta is a beachfront resort and retail development on the Gold Coast, incorporating 205 residential and 15 commercial lots. The applicant was the owner of two commercial lots, which it leased to a restaurant operator.
In September 2009, the Body Corporate entered into a three-year agreement for the supply of electricity with TRUenergy, which it on-sold to lot owners. The commercial lots were separately metered whereas most of the residential lots were not. The body corporate charged the commercial lot owners at a higher tariff than residential lot owners, justified by ‘higher service costs and capital requirements associated with commercial supply’. The arbitrary pricing system often resulted in surplus revenue. In these circumstances, the Body Corporate would use the additional funds for capital infrastructure upgrades associated with the supply of electricity, and to upgrade lighting.
The validity of the arrangements
The adjudicator determined that the arrangement was in the nature of an on-supply arrangement and was not an agreement under s 196 of the Act. Therefore, as there were no section 167 agreements in place, the invoices that had been issued by the body corporate were void.
Further, the adjudicator accepted the applicant’s submission that “utility” is a defined term under the Act, meaning just the electricity supply. Accordingly, even if s 196 of the Act had applied, the body corporate would not have been entitled to recover additional costs associated with supplying and maintaining the utility infrastructure (such costs being a liability of the administration fund).
The adjudicator also found various by-laws that purported to justify the arrangements and permit recovery from the owners to be void. Orders were made to record an amended CMS for the scheme and a period was allowed for the body corporate to negotiate s167 agreements with each owner, failing which the body corporate was required to cease supply to the relevant owners.