Energy company AGL fined $25m over welfare rort after Federal Court case found over 16k breaches

A major Aussie power company has been slapped with a $25m fine over charges to disconnected welfare recipients.

Australian energy company AGL has been slapped with a $25m fine over charges to disconnected welfare recipients and failure to issue timely refunds.

The fine comes after energy regulator AER took the power company to the Federal Court in relation to the issue through entity Centrepay, the ABC has reported.

The government-controlled facility allows welfare recipients to set up automatic payments to services including financial providers and telecommunication companies.

The fine comes after energy regulator AER took the power company to the Federal Court in relation to the issue through entity Centrepay, the ABC has reported. Picture: NCA NewsWire /Brendan Beckett

It has been reported the court found AGL continued to deduct payments from Centrepay accounts that were disconnected and failed to inform customers in time or provide timely refunds.

The court found AGL overcharged 483 Centrepay customers between December 2016 to November 2021 to an average of $1,000 each, comprising 16,000 breaches of the law.

In a statement, an AGL spokesperson said they are “disappointed that this issue occurred and apologises to the affected customers”.

In cross-examination during the case, AGL executive Jo Egan said the company was “really disappointed that this occurred and we’ve deeply reflected on the whole situation to understand how we got this so wrong.”

“Our systems and processes failed in this case. You know, it’s incredibly unfortunate. It is not in line with my experience of AGL or how we operate … It’s an incredible learning for us all, and I believe we’ve taken action now to prevent that ever happening again.”

The energy giant’s conduct was uncovered by regulators in 2020, with AGL issuing an apology to those affected that began “we noticed, after you left us, you failed to update your Centrepay arrangement”.

The court heard on Wednesday AGL was first issued a formal warning about the issue in 2013.

The issue appeared to be remedied until 2016, when the issue recurred and money again was illegally removed from welfare recipients accounts.

According to court documents, Ms Egan said the failure to detect these changes and to refund customers was because it was “not necessarily deemed a priority”.

Government services minister Bill Shorten has referred AGL, Origin and Ergon Energy to the regulator in relation to Centrepay payments. Picture: NewsWire / Martin Ollman

According to court documents, AGL identified a number of affected Centrepay accounts in October 2019 as part of a broader program of remediating customers with high credit balances. AGL then became aware of the illegal conduct by May 2020.

Centrepay is a free and voluntary service that can be used by Centrelink recipients to pay bills and regular expenses.

According to an Australian government website, “with your consent, Services Australia will take money from your payment before you get it and send it to the business you want to pay.”

“You can start, change or stop using Centrepay whenever you like.”

Centrepay payments are deducted from accounts by Services Australia at a customer’s direction, with money sitting as a credit in customer’s accounts.

The court judgement found that AGL failed to “identify that customers using Centrepay had ceased obtaining services from the AGL Entities,” failed to “take steps to cease the deductions,” to “notify the customers of the credits on their accounts and to refund those sums”.

AGL services about 4.5m customers across Australia, with less than 500 affected. It is understood that this is a small proportion of their total Centrepay users, and energy companies Origin and Ergon also have significant exposure relating to Centrepay payments.

Government services minister Bill Shorten has referred all three energy retailers to the regulator.

“What we say AGL management will remember is a very substantial penalty,” James Arnott SC, counsel for the energy regulator, said last week.

AGL noted that payment of the penalty will not impact their financial year guidance, including an underlying net profit between $530m and $730m.
The energy company said that while they respect the decision of the court, “the penalty is significantly higher than expected” and they are currently considering appeal.