From Michael West:
At the very time the states are sprucing up their energy companies for sale, further revelations of regulatory rorting will be flowing thick and fast.
Gold-plating, or excessive spending on poles and wires, has been shoring up industry returns for the past six years – and driving power bills higher, although demand for electricity actually has been falling.
Now a treasury analyst from Queensland electricity retailer Energex threatens to blow the lid on how the power industry “games the regulator” in unprecedented and gory detail.
Cally Wilson walked out of her job at Energex three weeks ago and turned whistleblower, telling the press how her bosses had conspired to push up power prices.
She says she was instructed to find a debt rate which would meet management’s targets — in other words, a high rate. “Unusually high” were her words.
The higher the WACC (weighted average cost of capital), the higher the return Energex could claim from the Australian Energy Regulator (AER) — and therefore the higher it would charge its customers.
Her allegations of data manipulation are the catalyst for the announcement of the parliamentary inquiry into “gold-plating”.
This is the real culprit behind power price increases, from the Garnaut Review:
And the over-investment has had utilities multi-factor productivity falling at the ludicrous rate of 4% per year. But no, it’s the carbon “tax” (which returned the money via tax cuts anyway).
