Two years ago, Bruce Robertson received a legal letter from Grid Australia.
The peak body for the nation’s electricity networks threatened to sue him for defamation.
They accused the analyst turned cattle farmer of causing them “significant hurt and damage”. Grid’s lawyers even demanded Robertson pay their legal costs.
Robertson’s offence had been to criticise the electricity giants for “gold-plating” – that is, spending up big on poles and wires that didn’t need to be built – and for claiming demand for electricity was rising, when in fact it was falling.
The funny thing was that the ABN number attached to the Grid Australia correspondence was not the number for the peak body Grid Australia.
Rather, searches of the corporations’ database showed the 11 digit number was registered to a Grid Australia Pty Ltd, a company whose sole director was a Daniel Rosenberg of Caulfield South in Melbourne.We managed to track down Rosenberg, a graphic designer with a nose ring and funky white spectacles, who had this to say:
“I’m Grid Australia. That’s my company. You say that someone is using my actual ABN number?”
The mistaken use of the ABN number brought into play potential penalties.
Under Section 23 of the A New Tax System (Australian Business Number) Act of 1999, it is an offence to “purport to identify yourself by using … an ABN that is not your own”. Penalty: two years imprisonment. Robertson took the lawyers to the NSW Legal Services Commissioner, the place where you go to complain about solicitors, but his complaint was dismissed.
What had prompted the heavy-handed action against the cattle farmer from Burrell Creek in the first place was Robertson’s submission to the Senate inquiry into electricity prices in 2012.
Now he has backed up again with a submission to the latest parliamentary inquiry.
The inquiry into the performance and management of electricity network companies will be heard in the new year.
Once again, Robertson pulls no punches, accusing the power giants of “gaming” the regulator, grossly overcharging customers and overcooking forecasts for electricity demand.
Although the carbon tax has often been the scapegoat for the dramatic doubling of electricity prices, the real culprits are the network companies whose spending on poles and wires accounts for half of the rises.
The guts of the problem is that the electricity companies get a “regulated return” on their assets so, the higher they value their own asset bases, the more the regulator permits them to charge for their services. So they charge a heck of a lot.
“Assets have been, and are being built on forecasts that in my opinion are professionally negligent,” says Robertson. “To make mistakes in forecasting is human. To make the same mistakes year after year, and fail to recognise clear and generally accepted trends is inexcusable.”
The upshot is not only that the high cost of energy is slugging the entire economy. It is also that hundreds of thousands of Australians now live in “energy poverty”.
According to the Australian Energy Regulator, in NSW alone more than 100,000 residential customers can’t pay their bills and have an average electricity debt of $542.
This industry is extraordinarily inefficient, says Robertson, citing research from the Productivity Commission which found that although productivity across all workers increased by 33.6 per cent over the period from June 1995 until now, in the electricity sector productivity actually fell by 24.9 per cent.
“In other words, while everybody else has been lifting their productivity by one-third, productivity in the cosseted electricity sector has declined by one-quarter”.
There is some funny stuff in Robertson’s submission, not least in his description of the way the industry dreams up fancy justifications for its overcharging. He points to the latest revenue proposal by the NSW transmission agency Transgrid.
This little beauty contains 20 pages of complex, technical arguments about the calculation of the rate of return. “It is backed up by no fewer than six consultant reports … by expert economic advisors NERA, Incenta Economic Consulting, corporate finance experts SFG Consulting, independent corporate advisory group Grant Samuel & Associates and banking corporation Westpac.
“The total pages written by consultants is 301. In total, the rate of return calculation involves six organisations and 321 pages of complex expensive reports to calculate an appropriate rate of return for just one network company.”
So the next time you open your power bill and baulk at the hefty charges, spare a thought for all those consultants who need to be fed.
Robertson then proceeds to tear to shreds the industry’s financial calculations, on which they base their charges. It is worth a read.
Among the findings, he shows the cost of debt claimed by Transgrid is grandly overinflated.
“The difference between the actual rate it is paying on its debt (5.87per cent in 2014) and what it is claiming (7.72 per cent) on its theoretical debt burden on $3.9 billion over the next five years is a staggering $72 million per annum over the five-year regulatory period, or a total of over $360 million.” That’s just for starters.
A Merry Christmas and happy New Year to all … yes even consultants.