Important changes to laws regarding electricity supply in Western Australian shopping centres

If you own or manage a shopping centre in Western Australia, the way you charge your tenants for electricity is about to change.

Two reform tracks are currently running side by side:

• the proposed amendments to the Commercial Tenancy (Retail Shops) Agreements
Act 1985 (WA) (Act); and
• the new regime for alternative electricity services (AES) under the Electricity
Industry (Alternative Electricity Services) Regulations 2026 (WA) (Regulations).

Whilst the dates for reform under the Act are still up in the air, key dates for regime change are fast approaching under the AES Regulations:

• 1 February 2027 for on-site power supply such as solar panels and battery supply; and
• 1 July 2027 for embedded networks (known as single property networks in the
legislation).

The current status?

Under section 12 of the Act, a landlord may recover operating expenses, including electricity, from a retail tenant where the lease provides for it, limited to the tenant’s ‘relevant proportion’ based on lettable area.

For electricity supplied to a tenant’s premises through an embedded network or on-site power supply, the Electricity Industry Exemption Order 2005 (WA) currently applies.

In practice:

• there are no limits on what an on-seller can charge;
• no registration or licensing requirements; and
• tenants do not receive the same consumer protections as other electricity
customers.

There is also broad acknowledgement that the current legislation does not prevent a landlord from charging tenants at a margin over its actual cost (subject to the terms of any lease or contract in place).

What is changing?

Amendments to the Act: ‘actual cost’ only

An April 2024 statutory review of the Act¹ was clear that it does not consider it legitimate for landlords to add a profit margin to, or otherwise inflate, the costs of electricity that they recover rom tenants as operating expenses.

It recommends amending section 12(3) so that landlords may recover the ‘actual costs’ incurred, but no more.

For embedded networks, electricity supplied to tenant premises is expected to fall under the new AES code, while common area electricity costs are expected to remain a matter for the retail tenancy legislation.

These changes have not yet been brought into force, but the direction of travel is clear.

On-site power supply electricity may also remain a matter for retail tenancy legislation,
depending on how the individual arrangement is structured.

Embedded networks from 1 July 2027

Supplying electricity to a tenant’s shop through a shopping centre’s embedded network will become a regulated AES and be subject to the code relating to embedded networks.

Key points:

• a supplier must be registered, with a maximum penalty of $100,000 plus $5,000 for
  each day the offence continues;
• only one registration is granted per network;
• the supplier must contract with, and bill, the tenant directly, with an agreement
  setting out the tariff, other fees, any right to vary and the manner of varying prices
  and how bills are calculated, and new tenants must receive prescribed disclosure
  before signing;
• tariff caps for small use tenants using up to 160 MWh a year;
• tenants using more than 50 MWh a year can require a direct connection to a
  licensed retailer at their reasonable cost; and
• tenants using more than 160 MWh a year will not be price capped but will keep all
  other protections under the Regulations.

On-site power supply (such as solar or battery systems) from 1 February 2027

Providing tenants with electricity from an on-site power supply (that the tenant does not own) will also become a regulated AES and be subject to the code relating to on-site power supply.

The provider must:

• be registered;
• enter into an agreement with the tenant; and
• bill in accordance with the code.

Pre-contract disclosure must include:

• the estimated costs over the first 12 months;
• the price per unit;
• subscription fees; and
•  all other fees.

Unlike embedded networks, there is no price cap for an on-site power supply. However, any mark-up must be built into the disclosed price, and the Australian Consumer Law applies so pricing must not be false or misleading.

There is a registration exemption where electricity is supplied pursuant to the terms of a lease without any separate contract in place, which may allow electricity costs to be built into rent. However, how this will operate in practice is unclear.

What about existing contracts/leases?

From 1 February 2027 (for on-site power supply) and 1 July 2027 (for embedded networks), any contract term for an on-site power supply or embedded network service that is inconsistent with the relevant code will have no effect, including in contracts already in place on those dates.

Embedded network providers benefit from a grace period until 31 December 2027 to upgrade their billing systems. On-site power suppliers have no such equivalent transitional period.

Suppliers already operating when the regime starts are taken to be registered while their application for registration is decided, provided they apply before 1 March 2027 (on-site power supply) or before 31 July 2027 (embedded networks). If a supplier does not apply in time, the deemed registration ends on that date.

It is unclear whether any amendments to the Act will apply to existing leases, but we consider that any changes are probably unlikely to apply retrospectively.

What now?

The rules for on-site power supply have been settled, with the relevant code of practice
finalised.

The position relating to embedded networks and any amendments to the Act are still taking shape and are yet to be finalised, but we will be monitoring developments closely.

Landlords and centre managers should now:

• review how electricity is currently recovered from tenants, for both common areas
  and tenant premises;
• map each shopping centre’s supply arrangements; and
• prepare for registration by 1 February 2027 and 1 July 2027.

If you would like to discuss how these changes affect your shopping centres or lease
arrangements, please contact Peter Beekink or Lauren Probert.

Disclaimer

The information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.

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