Energy giant AGL promised to stop wrongly taking money from the welfare payments of ex-customers via Centrepay years before it inexplicably allowed the unlawful practice to continue, diverting hundreds of thousands of dollars from the pockets of vulnerable Australians over more than four years, a court has heard.
The federal court heard on Monday that, even when the conduct was discovered in 2020, AGL failed to offer an apology and instead sent a letter to welfare recipients appearing to blame them for the failures.
The company also failed to offer any compensation or interest on the money it had wrongly taken from them and held for years, something one of AGL’s most senior executive has admitted was a mistake.
The federal court is currently considering what fine should be imposed on AGL for more than 16,000 breaches of the law relating to its use of Centrepay, a government payments system allowing welfare recipients to make automatic deductions for essential services, like electricity.
AGL used the system to continue taking money from the welfare payments of 483 customers long after they had ceased being AGL customers, allowing it to receive and retain an average of about $1,000 from each individual between early 2016 and late 2020.
A Guardian Australia investigation has revealed how three other energy retailers, including Origin and Ergon, also stand accused of using Centrepay to wrongly take money from the welfare payments of departed customers. The Guardian also revealed how failures in the system – which the government has now pledged to reform – allowed it to bankroll a Christian rehabilitation centre practising gay conversion therapy and exorcisms, and exposed remote Indigenous communities to predatory rent-to-buy appliance companies.
The federal court heard on Wednesday that AGL had been formally warned about similar conduct in 2013, prompting Centrelink to issue it with a remedy notice.
AGL implemented a manual fix to stop it from taking Centrepay payments from departed customers, and promised the federal government there would not be a repeat.
But the court heard that in 2016, without any explanation, AGL abandoned the fix it had implemented. That allowed it to continue diverting money from the pockets of welfare recipients.
“It’s very difficult to understand why that happened,” Josephine Egan, the company’s chief customer officer, told the federal court on Wednesday.
The practice continued undetected – either by the company’s audit and risk management committee, its compliance team, or other audit areas – for more than four years.
When it was eventually detected, AGL promised to return the money to welfare recipients. But the court heard that, in its letter to affected customers, it offered no apology, no explanation of the company’s failings, and no compensation or interest on the funds which it had held for years.
Instead, the letter, appeared to blame the welfare recipients for the issue.
“We noticed, after you left us, you failed to update your Centrepay arrangement,” the letter began.
Under cross-examination, Egan was asked whether she believed it was wrong of the company not to offer compensation or interest to the affected welfare recipients.
“Yes, I do,” she responded.
Egan described the culture of compliance at AGL as “strong”.
“[The Centrepay failure] is completely inconsistent with my experience at AGL,” she said. “But in this situation we absolutely got it wrong, we absolutely got it wrong.”
The court heard – theoretically, at least – the 16,000 breaches could attract a $1.6bn fine.
A fine of that scale is unlikely, but lawyers for the Australian Energy Regulator are pushing for a substantial penalty, one that cannot be considered by AGL as an acceptable cost of doing business.
The court heard that nothing had been put in writing to Egan’s 1,600-strong AGL team to notify them of the Centrepay failings. Egan said she had been relying on oral conversations with her team, an approach to compliance the AER described as “fanciful”.
Lawyers for the AER said that approach risked a repeat of 2016, when lessons were forgotten and the problem allowed to recur.
“What we say AGL management will remember is a very substantial penalty,” James Arnott SC, counsel for the regulator, said.
The hearing continues on Wednesday before justice Kylie Downes.
