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Free run over for energy companies as Government tightens reins

25 May 18

The Australia Energy Regulator (AER) has opened an investigation to determine whether electricity networks and regulated gas pipelines are gouging consumers to cover their corporate tax liabilities.

The review follows a request by the Turnbull Government.

Regulated networks receive an allowance to cover their corporate tax liabilities. This is passed onto consumers, at a cost of around $600 million a year.

Australian Taxation Office (ATO) analysis of tax data between 2013 and 2016 has revealed a discrepancy between the tax allowances the AER previously set for network businesses and the amount those businesses actually pay.

To ensure consumers aren’t paying more for their energy than they need to, the Government has launched an investigation.

The Minister for the Environment and Energy, Josh Frydenberg, blasts energy companies that could potentially being using the corporate loophole.

He states, “It is totally unacceptable for consumers to be charged for corporate tax liabilities that are not actually incurred.”

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

If necessary, the AER will be able to exercise its information gathering powers to obtain any material they need to complete their review.

The AER will review how it models tax costs and make any changes required before the next round of revenue determinations, which are due in April 2019. It will also provide recommendations on any changes required to the national energy rules.

This review complements action already taken by the Government to fix the regulatory framework, including abolishing the Limited Merits Review regime, which allowed network businesses to increase electricity bills by around $6.5 billion through the appeals process.

In addition, the investigation also follows a new rule set by the Australian Energy Market Commission (AEMC)that works to ban misleading energy discounts.

The AEMC introduced a new rule that will prevent retailers from offering discounts on an energy deal if the discount is based on higher rates than the retailer's standard rates.

Frydenberg says, “Big discounts on an energy offer can seem very attractive, but if the discount is only available because the price of energy is artificially inflated, the consumer can end up worse off.”

“The new rule will prevent retailers from attempting to confuse consumers, providing them with the confidence that a discount is exactly that - a discount.”

In addition, the AEMC has recommended that the AER's new rule on how retailers market their offers is subject to appropriate penalties.

The Turnbull Government agrees with this approach and will be pursuing this reform through the COAG Energy Council.

All this complements actions already taken by the Turnbull Government as part of itsa plan to deliver more affordable energy for Australian households, including:

  • a rule change requiring energy retailers to notify their customers when their discounts are about to finish or change;
  • a rule change proposal requiring retailers to provide their customers with advance notice of price changes;
  • a rule change proposal to allow consumers to submit self-reads of their energy meters; and
  • a rule change proposal to reduce the time it takes to install new meters.
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