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Millions of Aussies overcharged up to $1,200 on energy bills

A composite image of Australian money and numerous energy bills staked on top of one another.
A composite image of Australian money and numerous energy bills staked on top of one another.

Millions of Aussies have forked out over $10 billion more than necessary to energy providers, according to a new report.

The Institute for Energy Economics and Financial Analysis (IEEFA) report found that since 2014 weaknesses in the regulatory system allowed energy providers to take “supernormal profits”.

The report said allowing companies to take such massive profits also diverted funds that should have been invested in “Australia’s necessary energy transition”.

“Consumers are paying much more than necessary for safe and reliable electricity,” the report said.

“The total extra profit above normal levels, or ‘supernormal profit’, extracted by network businesses over the eight-year period was $10 billion.”

The report found the actual profit received was 67 per cent higher than what would be considered “normal”.

What loophole allowed this to happen?

The report determined that the Australian Energy Regulator (AER) and network businesses overestimated how much it would cost to build, operate and maintain the network.

Then networks charged those overestimated costs to consumers, allowing the shareholders in the companies to retain the difference between how much it actually cost and the revenue the business made.

Essentially, network businesses need to present their expected future costs to keep the network running to the AER.

The AER then reviews the estimated costs and sets out how much the networks can charge customers.

“Most network businesses are charging consumers significantly more than required to achieve their normal return and pocketing the difference in the form of additional returns,” the report said.

“The supernormal profits built up over eight years imposed an additional cost of between $800 to $1,200 per customer, depending on the state.”

Cumulative Supernormal Profits per Customer by Jurisdiction, 2014-2021
Cumulative Supernormal Profits per Customer by Jurisdiction, 2014-2021. (Source: AER data, IEEFA analysis)

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