AGL Energy has been accused of using bids on the wholesale electricity market to inflate power prices and cause higher bills for consumers.
A class action filed in the NSW Federal Court seeks to compensate customers for AGL's alleged manipulation of the electricity market which affected downstream prices charged to homes and businesses.
The energy giant is claimed to have made what is known as an "initial dispatch offer" for the price of electricity coming from its South Australian power stations and then putting in a late-stage rebid to push the price up further.
"AGL took advantage of its market power for the substantial purpose of deterring or preventing competing generators from engaging in competitive conduct," the pleadings say.
"AGL's contraventions were a cause (of) the prices set under default market offers being higher than the prices otherwise would have been."
These offers took place on the South Australian Region of the National Electricity Market, a wholesale exchange operated by the Australian Energy Market Operator where generators sell the electricity produced.
The lead applicant in the class action, SA Country Pubs, runs the Griffins Head Hotel an Adelaide's Hindmarsh Square and claims it was overcharged for its power bills because of AGL's misconduct.
The firm says it paid over $474,000 for electricity from June 1, 2017 up until the Piper Alderman-run class action was filed on June 1 this year.
In a market with high barriers of entry for new generators or the expansion of existing ones, AGL had significant competitive power in the SA market, SA Country Pubs says
This includes providing over 37 per cent of all electricity across the state in the 2017 financial year, documents filed with the court claim.
Competitors were also unable to come in with lower bids because AGL allegedly opted to make its rebids at the last minute.
"AGL engaged in the short-notice rebidding in reliance on the substantial degree of power held by it in the market," the statement of claim says.
"(AGL) stood to gain greater financial reward from successful short-notice rebidding than a smaller generator."
This market power allowed AGL to create bids which AEMO would have to accept to dispatch electricity through the grid, the class action says.
If successful, the lawsuit could lead to AGL paying damages, compensation and legal costs to overcharged consumers in South Australia.
In an ASX announcement, AGL said it had been served with the class action and stood by its actions.
"AGL takes its compliance obligations seriously and intends to vigorously defend the proceedings," it said.
The matter is scheduled to come before the Federal Court on July 13.
