Electricity companies could be planning to ”double dip” on the carbon price, potentially overcharging customers by $1.5 billion, according to a group of industrial companies.
The companies have lodged a submission with the consumer watchdog, asking it to investigate their concerns that electricity retailers could charge excessively for the carbon price after it starts on July 1. According to the companies, which have not been publicly identified, a formula in some electricity contracts could effectively force big industry to pay the $23 a tonne carbon price twice for some of the power it uses.
They have also expressed concern that, with less than four months until the carbon scheme starts, some electricity retailers have not explained how they plan to calculate the cost.
Lodged on behalf of the companies by lawyers Macpherson & Kelly and consultants Key Energy & Resources, the submission calls on the Australian Competition and Consumer Commission to investigate whether the price would be passed on fairly.
Key Energy & Resources consultant Mark Searle said it was likely extra cost to industry would flow to consumers. ”We’re concerned that there is a potential for double-dipping and that could be as high as $1.5 billion, and we are concerned that a number of retailers still haven’t confirmed exactly what they are going to do,” he said.
The submission says some electricity contracts include a formula proposed by the Australian Financial Markets Association setting out how the carbon price should be passed on.
The formula multiplies the carbon price by the average emissions intensity of Australian power plants - 0.9 tonnes of emissions per megawatt hour generated.
Based on the carbon price of $23, it would add $20.70 per megawatt hour to a power bill.
But the submission says some of the power sold by retailers will already have the carbon price factored in prior to the retailers buying it on the wholesale electricity market. This applies to about a third of all wholesale electricity - roughly the proportion bought on the Australian Stock Exchange futures market.
Mr Searle said the formula could lead to consumers being charged the carbon price twice for 35 per cent of the power they use. He said across the National Electricity Market the total extra cost could reach $1.5 billion.
Electricity retailers said they were working to ensure the carbon price was passed on fairly.
Energy Retailers Association of Australia chief executive Cameron O’Reilly said the implementation was a challenge. He said the association’s members did not discuss with each other how they would be affected by the carbon price.
Origin said its customers’ bills would reflect the new cost, consistent with the terms and conditions of their contracts.
”Origin will communicate directly with our customers to clearly explain the impact of the Clean Energy Act on their contract price,” a company spokeswoman said.
AGL said it was working on ensuring the price rise from July 1 was fair for its customers.
The Australian Financial Markets Association said the complaint was the result of a misunderstanding of its formula.
Association executive director Duncan Fairweather said it could lead to unnecessary concern for consumers.
‘‘The [formula] does not cause “double dipping”, which some companies have apparently expressed concern about. Rather, it is an equitable method of offsetting any windfall gains or losses that might arise … from the introduction of a carbon trading scheme,’’ he said.
Mr Fairweather said he was confident any investigation would back the association’s formula.
