Network gold plating to be investigated by Senate

Federal Parliament’s lower house has voted in favour of holding an independent inquiry into allegations of the “gold plating” of Australia’s electricity networks, and whether this has been a factor driving soaring power costs.

The motion, which was put before the Senate on Thursday by Greens leader Christine Milne, moved that an independent inquiry be held into whether power network companies had misled the Australian Energy Regulator on matters influencing the setting of electricity prices.

This will include investigation into information on the networks’ weighted average costs of capital; the necessity of added infrastructure; regulated asset valuations; and actual interests rates claimed against actual borrowing costs.

Last week, a former employee of the Queensland government-owned network Energex turned whistle blower, telling the Courier-Mail her bosses had examined how to artificially drive-up household power prices.

Cally Wilson, a treasury analyst with Energex, said staff manipulated data in modelling as the company looked at ways to boost revenue – a practice that preceded the company’s revenue proposal to the AER.

The inquiry will also ascertain whether state-owned network companies have put profit above the interests of energy users; whether pricing regulations have been manipulated to deliver rates of return above actual cost of capital; and whether the AER had actively pursued lowest-cost outcomes for energy consumers.

Milne’s motion, which won the vote, calls for the investigation to be held by a national independent body, appointed by the federal government (hopefully Dick Warburton is busy), “with the required powers and reach to investigate and prosecute where necessary.”

The results of the inquiry are to be reported to the Senate by Parliament’s first sitting day in March, 2015.

Milne also wants committee members to consider whether network monopolies should have the right to recover historic network overspending, when it has delivered “unwanted and unused infrastructure.” And to investigate how the regulatory structure and system could be improved.

Crucially, she has also called for investigation into whether networks were discriminating against households and businesses with rooftop solar or other on-site electricity production.