For property owners, developers and managers, third-party meter ownership can seem like a convenient and easy-to-manage option. However, as with any business decision, third-party meter ownership comes with its own set of risks and challenges that demands careful consideration.
Business News spoke to Damien Moran, managing director of EnergyTec, Western Australia’s industry leaders in end-to-end sub-metering and energy solutions, to better understand the complexities of third-party meter ownership and its impact on property management.
Third-party meter ownership refers to the arrangement where utility meters (for electricity, water, or gas) are installed, managed, and maintained by an external entity. Under this model, the third party typically installs the meters at no upfront cost to the property owner but charges ongoing service fees, usually paid by either the property owner or tenants.
“This model allows third-party providers to handle all aspects of meter management, including installation, maintenance, meter reading, and regulatory compliance,” Mr Moran explained. “For developers and property owners, this offers immediate operational convenience, especially in large-scale projects.”
By outsourcing the installation, management and maintenance of utility meters to an external entity, significant upfront costs can be avoided, which is particularly enticing for large developments where the cost of purchasing and installing meters could be substantial.
Although third-party meter ownership offers some immediate benefits, there are several challenges that developers and property owners must consider, including higher long-term costs, loss of control, long term contracts that get inherited by others should the property be sold and compliance and regulatory risks.
The risks and challenges of third-party meter ownership
While third-party meter ownership can eliminate initial capital expenditure, it comes with ongoing service fees. Over time, these fees can accumulate, potentially exceeding the cost of owning and maintaining the meters upfront.
Mr Moran emphasised that property owners need to conduct thorough due diligence before entering a third-party arrangement. “While third-party meter ownership can appear straightforward, property owners must be aware of the long-term implications, especially when it comes to ongoing fees, data control, and compliance risks,” he said.
Another major disadvantage of third-party meter ownership is the loss of control over metering data. Property owners may not have direct access to the energy consumption data, which can hinder their ability to manage energy usage effectively or resolve billing disputes. Third-party meter ownership could also lead to operational disruptions if the third-party provider faces operational failure or a change in ownership.
Under the embedded network code of practice (ENCOP), property owners are still responsible for ensuring that all regulatory requirements are met. If the third-party provider fails to meet these standards, the property owner could be held accountable.
Mr Moran underscores the importance of understanding these risks before choosing third-party meter ownership. “If an owner maintains ownership of their metering assets, they’re in control of both the revenue and the cost. However, if they hand that over to a third-party retailer, they’re at the mercy of the decisions of that retailer, price increases, and service fees. They lose control over critical aspects of energy management, especially in sectors like strata, where body corporate makes key decisions,” he said.
Retaining control versus outsourcing
While outsourcing to a third party can alleviate operational burdens and provide immediate cost savings and a level of convenience, it also means letting go of control over vital energy management functions.
Given the rising costs of energy, property owners must also carefully assess the financial viability of outsourcing energy management to third parties whose profit motives may not align with the interests of tenants or long-term property value. “Property owners who manage their embedded networks directly are able to negotiate better electricity supply agreements and pass on energy costs at cost to tenants, benefiting both landlords and tenants,” Mr Moran explained.
There are also sustainability benefits to ownership, with property owners who maintain control over their meters able to invest in renewable energy solutions like solar panels and batteries, providing opportunities for energy cost reductions and additional revenue from surplus energy generation.
Mr Moran explains further, “When owners retain control of their metering assets, they have more control over their energy costs and can leverage opportunities like solar energy, EV chargers and battery storage to reduce long-term costs and control over their carbon credits, while contributing to sustainability and net-zero goals,” he said.
“With the rising interest in electric vehicles, the ability to offer EV charging infrastructure could also become a significant value-added service for tenants.”
Complexities of third-party meter ownership
Driven by cost-saving motivations, developers on the Eastern States have been bringing the third-party model to Western Australia, resulting in why third-party meter ownership is becoming more common especially in residential developments in WA.
Developers and owners of commercial, industrial, and retail property in Western Australia have operated embedded networks for over 30 years, hence they understand the value of their embedded networks and the vast majority retain ownership of their utility meters, solar, BESS and EV charging assets. However, it’s predominantly the residential strata sector where some developers are opting to outsource to third-party ownership, as this model is broadly utilised in the eastern states,” Mr Moran explained. “Such decisions have implications on the lot owners and the schemes over the longer term, as this model limits their ability to offset or curtail rising energy costs over time.”
In WA, property owners are less burdened by compliance costs compared to the Eastern States such as Queensland, where the complexity of the regulatory environment results in higher fees and greater risks. The additional compliance requirements significantly increase the cost of service fees for property owners and tenants alike.
Developers, eager to avoid the high costs associated with metering infrastructure, opt to have third party retailers fund the installation of meters and handle ongoing operations. However, as Mr Moran notes, this often leads to property owners ultimately inheriting metering assets without the same level of control or transparency as they would have if they had managed the infrastructure themselves.
“Third-party meter ownership may appear to be an attractive, cost-effective option in the short term, but it comes with complexities that could significantly impact a property’s financial performance and operational control in the long run,” he said.
Making informed decisions
Before entering into any third-party agreements, property owners and developers should thoroughly evaluate the potential risks, including long-term costs, regulatory compliance, and the loss of control over energy data.
Mr Moran’s final piece of advice for property owners considering third-party meter ownership is simple: “Do your homework. Understanding the long-term financial and operational impacts of third-party meter ownership is crucial.
“Property owners need to weigh the immediate savings against the potential for escalating service fees, loss of data control, and regulatory risks, and need to look beyond the short-term cost savings,” he said. “They must consider how their energy infrastructure will affect their bottom line over time, especially as energy markets and regulations continue to evolve.”
With expert guidance from specialists like EnergyTec, who have been in the business for 30 years, property stakeholders can navigate the intricacies of embedded networks and third-party meter ownership to ensure that their energy infrastructure aligns with both their immediate needs and long-term business goals.
