One of Australia’s biggest power companies might appeal a $25 million fine for a Centrepay scandal that saw it overcharge “vulnerable” people on welfare without their knowledge.

The Federal Court ordered the fine against AGL on Thursday morning.

AGL was ordered to pay the fine after energy regulator AER took the publicly listed power company to the Federal Court, alleging AGL had continued to charge hundreds of welfare recipients after they stopped being its customers.

AGL and three of its subsidiaries, including AGL Retail, Sales, South Australia and Power Direct, were found in August to have breached National Energy Retail Rules more than 16,000 times.

The court found AGL overcharged 483 Centrepay customers from 2016 to 2021.

Centrepay is a government-owned service that lets people on welfare set up automatic payments to companies like power providers, lenders and telcos.

These payments come out of someone’s welfare before they get it.

Not only did AGL keep charging people via Centrepay once the service from the power company had stopped, but the Federal Court found that it had also not notified people of this or give them timely refunds.

The amount overcharged totalled $468,310.

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The AER said the record penalty secured by its action “reflects the seriousness of the breaches”.

“[It] serves as a warning that the AER expects all retailers to refund customers if they have been overcharged,” AER chair Clare Savage said in a statement.

“The actions by AGL negatively impacted hundreds of people over an extended period.

According to the Services Australia website, Centrepay’s primary customer database includes Aboriginal and Torres Strait Islander peoples, older Australians, people living in remote communities, people with disability and culturally and linguistically diverse people.

Largest penalty since 2022

Justice Kylie Downes ordered the $25 million penalty, which is the largest in any case brought by the Australian Energy Regulator since Origin was fined $17 million in 2022.

“As customers were improperly deprived of their welfare payments for months or years as a result of the contraventions by AGL, this caused them loss and damage, which is a factor that weighs in favour of a substantial penalty,” Justice Downes said in her decision.

She said the high penalty would be sufficient to deter AGL and others from breaking the rules.

“AGL is disappointed that this issue occurred and apologises to the affected companies,” its statement to the ASX reads.

The Federal Court has also ordered AGL to implement a three-year compliance system so that it does not charge “inactive” customers again.

The company’s ASX statement says it has already improved its “handling of Centrepay payments” since the issues occurred.

“AGL respects the decision of the Court,” it notes.

“As the penalty is significantly higher than expected, AGL will closely review the Court’s judgement and consider whether to appeal.”

Yet its ASX statement also notes the fine will not impact the $7.1 billion dollar company’s looming financial results, with it still expecting to deliver underlying net profit in the 2025 financial year of up to $730m.

Centrepay under reform

The AGL case is just one that has raised scrutiny of Centrepay.

AER has confirmed Services Australia has referred three other power retailers to it over concerns they also have been taking payments off inactive Centrepay users.

Federal government agency Services Australia say they are pausing new business applications while they reform the voluntary bill-paying service.

“We’re reforming Centrepay to meet customer and business expectations and improve the efficiency and integrity of the service,” a statement on Services Australia’s website reads.

Services Australia noted that while they reformed Centrepay, multiple issues would be addressed such as safeguards and protections for customers to reduce financial harm, identifying high-risk products, services and business practices.

It is not the first time Centrepay has been accused of letting companies exploit some of the country’s most vulnerable.

In 2019, consumer law advocates submitted a formal complaint to the Commonwealth Ombudsman over retailers accessing Centrepay to exploit people via high-cost loans for fridges and TVs.

In 2023, rental appliance business Rent4Keeps charged a disability pensioner $6,760 for a phone.

The businesses would take fortnightly payments out the pensioner’s Centrelink benefits through Centrepay.

In December, Australia’s financial regulator ordered a Northern Territory clothing retailer to stop using Centrepay over concerns it was exposing vulnerable Aboriginal customers to financial risk.

The Australian Securities and Investments Commission made the same call on a second NT clothing shop earlier this year.

ABC/AAP