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Frydenberg asks energy regulator to probe electricity price-gouging claims

Frydenberg asks energy regulator to probe electricity price-gouging claims

The Turnbull government has asked the Australian Energy Regulator to investigate claims electricity network companies are price gouging customers to help pay their corporate tax liabilities.

While electricity networks and regulated gas pipelines receive an allowance as part of a revenue determination process to cover their tax bills, analysis by the Australian Taxation Office between 2013 and 2016 has found some companies may be claiming up to three times more than they should.

It is understood up to an extra $400 million a year may be being passed on to customers by the companies to help pay their corporate tax liabilities. This is in addition to the $600 million approved by the regulator.

Federal Energy Minister Josh Frydenberg has ordered the review by the AER to look into the discrepancies between tax allowances and the actual tax paid by electricity network companies.

"It is totally unacceptable for consumers to be charged for corporate tax liabilities that are not actually incurred," Mr Frydenberg said.

"The Turnbull government wants to ensure consumers are paying no more for their energy than they have to."

The ATO was limited in the advice it could provide due to tax privacy laws so the Turnbull government has asked the AER to investigate further.

Mr Frydenberg has asked the AER to review how it models tax costs and make any changes required before the next round of revenue determinations that are due in April 2019. It will provide recommendations on any changes required to the national energy rules.

It comes as a report has found the Turnbull government's proposed rule changes to crack down on dodgy electricity discounts will not fix the problems and could make things worse.

'Smoke and mirrors'

With the Australian Energy Market Commission expected to release its final rule change on retail offers on Tuesday, the report by The Australia Institute, also to be released on Tuesday, found the proposed rule change will only capture 17 of the 2300 retail offers available to customers.

Report author Dan Cass said while the Turnbull government's plans to crack down on fake discounts from energy retailers was well intentioned, the AEMC's proposed rule change was full of loopholes that could still be exploited by retailers.

"If retailers exploit the loopholes in the new rule, there could well be no benefit to consumers at all and no end to the widespread practice of false 'discount' contracts," Mr Cass said.

"The AEMC has defined what is deceptive according to its rule in such narrow terms that it may end up not capturing any deceptive offers."

Electricity retailers last year agreed to make it easier for customers to switch to better offers on their electricity contracts, but The Australia Institute report found there was still "smoke and mirrors" in trying to determine whether a customer was on a better deal.

The report found the number of retail offers to consumers was confusing, with up to 2730 offers available to residential customers from 32 retailers in the Australian market.

Better deal

It said the ability of retailers to set the "standing offer", or baseline offer, from which discounts were offered allowed them to dupe customers into thinking they were getting a better deal than they really were. The average spread from the highest to lower standing and market offers was $2393 in Victoria.

Retailers could also offer non-price incentives, such as tickets to movies or sporting events – which had nothing to do with the provision of electricity – to get customers to sign up for expensive or misleading contracts, the report said.

The Australia Institute said a partial re-regulation of the electricity sector, which is what has been proposed in Victoria, could help set a clear benchmark against which fake "discounts" could be assessed.

Financial Review

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