STRUGGLING householders hit with double-digit power price rises will be slugged for almost $2 billion for electricity network expansions that never went ahead.
While state-owned energy company Energex “saved” more than $1.8 billion on project spending in the past five years, industry experts say consumers will ultimately pick up the tab under the national electricity rules that allows energy companies to retain any unused revenue.
Energex’s latest bid to the Australian Energy Regulator shows $4.42 billion of the $6.24 billion in spending Energex had approval for in 2010-15 was actually spent.
The unspent revenue will eventually benefit power users by curbing growth in the value of the network in future years.
But it means those same households footed the bill for unneeded upgrades, or planned “gold-plating” of the network – at a time when disconnections for the non-payment of bills soared.
Energy companies’ revenues were last locked-in by the regulator in 2010 and factor in a return on capital spending needs. But falling energy demand and a pledge by the Newman Government to end so-called “gold-plating” led to some projects being scrapped.
Energex posted a $500 million profit in 2013-14, paying $406 million to the State Government.
But Energy Networks Association chief executive John Bradley said the rules were designed to prevent overspending by giving incentives to stop unnecessary works.
The burden of past spending has raised questions about the prospect of energy network asset writedowns.
Analysis by energy economist Bruce Mountain shows a large spike in the valuation of the state’s poles and wires since 2002, which will continue to sting householders down the track. He said the network value per customer statewide soared from $3400 in 2002 to $9400 in 2013.
The rise was a product of rules encouraging state owners to expand energy assets to boost return, or at least not take a strict view of expansion plans, Mr Mountain said. “Ultimately, asset valuation is a decision for the owner and if they chose to they could write the asset down and instruct the regulator accordingly,” he said.
Energy Minister Mark McArdle said the asset base was a matter for the regulator, and that “significant debt, borrowing and finance costs, were locked into the cost of supply by the former government”.
Energex said it had proposed below-inflation price rises for the next five years.