AGL slugged with $3m fine for Victorian efficiency certificate shortfall

AGL Energy has been hit with a nearly $3 million fine after two of the gentailer’s sales divisions failed to meet their obligations under Victoria’s energy efficiency scheme.

The Essential Services Commission said on Monday that AGL – which supplies gas and electricity to about a quarter of Victorian residential and business customers – had paid a shortfall penalty of almost $2,991,621 after failing to surrender enough certificates to offset its liability under the scheme.

The ESC said that the retailer had fallen short of its obligation by between 5 and 10 per cent of its total 2017 liability, which equated to a failure to surrender 64,033 Victorian Energy Efficiency Certificates.

The Victorian Energy Upgrade Scheme requires liable entities to surrender certificates in proportion to the volume of electricity and gas they sell to Victorian customers.

AGL’s fine – the largest to be issued under the scheme so far – is a stand-out; all other electricity and gas retailers operating in the state fully met their obligations, the ESC says.

And it puts another black mark against the retailer’s name in Victoria, where it was warned by the ESC earlier this month “to get its house in order” after data on performance, customer complaints, hardship levels and customers’ debt was found to be inaccurate.

In that case, the ESC gave AGL a month to provide correct data, and warned that a failure to comply would “immediately initiate a review” of whether AGL could keep its licence to operate in Victoria.

“It’s disappointing that a company with the experience of AGL would fail to fully comply with its obligations,” said ESC chair Ron Ben-David on Monday in comments about the VEEC shortfall.

“The legislation is very clear about retailers’ obligations and the consequences of failing to meet those obligations.”

For AGL’s part, the company’s head of wholesale markets, Richard Wrightson, said the shortfall was “an oversight” and said the company had apologised.

“AGL had created the requisite number of energy efficiency certificates for the period, but had not surrendered them due to an accidental omission,” Wrightson said.

Certainly, it makes little financial sense, with the price of certificates (VEECs) currently somewhere around $21, and the shortfall penalty rate for 2017 at $46.72.

In that regard, the VEUS (formerly known as the Victorian Energy Efficiency Target, or VEET) differs from the federal LRET scheme.

Under the terms of the LRET, the failure of liable parties to surrender the right amount of LGCs results in them paying a penalty of $65 for every megawatt-hour of renewable energy short of the target, which, not being tax deductible, actually works out to more than $92/MWh.

But due to a quirk of the market, companies have opted for the penalty as the cheapest course of action in the current renewables market – particularly those companies that could deploy tax losses.

In this case however, “AGL fully understood its responsibilities but failed to surrender the correct number of certificates,” said Dr Ben-David on Monday.

All things considered, the gentailer has had a choppy few weeks, with the sudden and unexplained exit of visionary CEO Andy Vesey, the closure of its new energy division – and the leader of that, Elisabeth Brinton – and the departure just last week of its chief economist Tim Nelson.

And two weeks ago the company announced another abrupt departure, this time from the residential rooftop solar installation business – a move that would set it back $47 million from the write-down of goodwill, systems investments and inventory, plus other business closure costs.