AGL, Origin and Energy Australia inflating power profits
Summary: THREE electricity giants who control 90 per cent of the NSW electricity market are gouging customers to pay millions to fat cat bosses and hire thousands of new managers and sales people who never produce a single kilojoule of power.....
Energy experts have told The Daily Telegraph that contrary to claims by the big three — AGL, Origin Energy and Energy Australia — the price of producing electricity has not gone up in a decade.
The electricity retailers’ claim that coal and gas prices are the reason for skyrocketing electricity bills has also been described by one industry expert as a “total con” simply hiding rampant price gouging.
In NSW, businesses are struggling with supercharged electricity bills and more than 60,000 homes face being cut off while unconcerned fat cat electricity bosses are trousering pay packets and bonuses worth millions of dollars.
But it appears the truth behind astronomical power bills is that it is a blatant cash grab aimed at lining the pockets of private companies, who spend the money on pay rises, extra managers and a growing army of sales people.
The Australia Institute’s senior researcher David Richardson said blaming the soaring prices on the increased cost of gas and coal was a “total con”.
“Our research shows that the cost of gas makes up just 3 per cent of your final bill and coal just 5 per cent,” he said.
“It in no way explains why bills have gone up by 183 per cent on average over the last two decades.”
The other 92 per cent is going towards soaring annual profits well in excess of $100 million, which are rewarding electricity chiefs with bumper pay packets.
Energy expert Bruce Mountain said the “truth” was “the price of producing 90 per cent of all Australian electricity has been stagnant or declined over the last decade”.
New figures released by the Australian Energy Regulator show the price the electricity companies buy power at on the wholesale market will actually drop by one third — from $90 a megawatt hour to $60 MWh — over the next four years.
“There is nothing inherent in the Australian economy or electrical system that means electricity prices should be so high,” Mr Mountain said.
Meanwhile, data sourced by the Australia Institute shows that electricity providers have increased their management teams by 200 per cent over the past 20 years.
Sales teams have grown by almost 400 per cent. Mr Richardson said: “One of the biggest costs now is in acquiring or retaining customers, which we used to call advertising. Why should electricity customers pay for that?”
Australian Bureau of Statistics figures show electricity companies have increased the number of managers over the past 20 years from about 2500 to 8500 people. At the same time the sales force has jumped from 607 people to 3008.
AGL’s boss Andy Vesey, who was recruited from America, pocketed $6.9 million last year while Energy Australia’s chief executive Catherine Tanna was rewarded with a $5.1 million salary and bonus.
Origin’s new chief Frank Calabria has a $1.7 million baseline salary, with a potential $2.21 million bonus.
Such bonuses are earned on the back of bumper profits. However, Mr Richardson said the electricity companies were amassing those profits by falsely inflating the amount spent on equipment to produce and supply power and in turn bumping up the price they can charge customers for electricity.
And while the competition between the main retailers is meant to keep their profits in check, an analysis of their shareholders show they are majority-owned by the same four powerful financial institutions: HSBC, JP Morgan, National Australia Bank and Citicorp.
“If you own a big chunk of two different companies in the same market the last thing you want is to see competition between the two because it will reduce their profitability. The ACCC needs to look at this,” said Mr Richardson.
Energy advocate Nathan Vass, CEO of The Australian Power Project, said: “It is incredibly difficult to understand how the energy companies can morally justify the bloated pay packets of their CEOs when their customers can’t afford to turn on their heaters in winter.”
An AGL spokesman claimed the price hikes were down to “significant increases in wholesale market prices”. He said Mr Vesey’s bumper salary was “benchmarked with the market”.
Origin’s spokesman also blamed an increase in bills on the “price of power we buy” despite clear evidence to the contrary.
Meanwhile an EnergyAustralia spokeswoman explained her boss’s exorbitant pay: “The average executive earns much more than the average working person so it is natural people get frustrated and angry, particularly when they’re feeling real pressure from rises in the cost of living.”