‘Monopoly’: Aussies’ $10bn power bill rip-off
A shocking new report has found Australians were overcharged by $10bn on their electricity bills over an eight-year period.
The Institute for Energy Economics and Financial Analysis paper claimed energy network providers in the country’s east received 67 per cent higher than normal profits from 2014 to 2021 after consumers were made to pay more than was necessary.
What an energy company can charge for maintaining electricity distribution and transmission services, the “poles and wires”, is set in consultation with the Australian Energy Operator.
They are subject to incentive-based regulation, where businesses can pass on costs to consumers through their power bills.
It means these businesses are allowed to keep the savings if they can make efficiencies and reduce costs below their allowed revenue.
But the Institute for Energy Economics and Financial Analysis discovered network companies had received $10bn in extra profit above normal levels that was ultimately permitted by the energy regulator.
The paper’s author Simon Orme said customers had been forced to spin “golden silk for network providers for nearly a decade”.
“The Australian Energy Regulator is responsible for making sure networks charge consumers only what is required to cover the costs of investing in, building, maintaining and operating the networks, plus a reasonable profit to ensure compensation for investors,” he said.
“That network providers in Queensland, NSW, Victoria, South Australia and Tasmania have gained super profits by persistently charging too much, resulting in overall retail electricity prices being higher than necessary, is a fact energy ministers championing lower electricity prices may have been unaware of.
“If this situation is not improved, energy consumers will continue to pay more than required for electricity distribution and transmission network services and up to 43 per cent more for new assets into the future, increasing the cost of the energy transition and deterring investment in low carbon generation.”
He said government action was needed to ensure consumers would no longer be overcharged.
“Now that they are aware, the federal government should establish an independent commission of inquiry into the economic regulation of networks, working together with participating national energy market jurisdictions,” Mr Orme said.
“The commission of inquiry should work to increase the reporting and monitoring of network businesses’ profits, make changes to the rules and laws to improve economic regulation of networks, remove barriers to consumer representation in economic regulation processes and ensure frameworks for future investment are efficient.
“Improving the regulations governing monopoly electricity networks in Australia will help constrain network supernormal profits and reduce the strong upward pressure on consumer bills.”
Australian Energy Regulator chair Clare Savage said she was disappointed the organisation had not been given the opportunity to contribute or review the report.
She expressed confidence in the incentive-based regulatory framework and said consumers had benefited “significantly” from it.
“We are concerned about any claims that our regulatory framework provides electricity networks with supernormal profits,” Ms Savage said.
“Our regulatory framework is based on enabling networks to earn an adequate rate of return if they produce efficiently.
“Businesses can earn returns above the rate of return set by the regulator if they outperform the expenditure forecasts set by the regulator or they provide demonstrated benefits to consumers.
“This is part of the incentive-based regulatory framework where businesses are rewarded to the extent they are able to promote better long-term outcomes for consumers.”
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