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SYDNEY, 29 Oct – POWER USERS IN AUSTRALIA paid for a $40 million substation as part of $1 billion spent on gold-plating electricity infrastructure — and it’s not even hooked up to the grid.

State-owned energy company Ausgrid spent the cash in breach of national electricity guidelines, with the costs passed on to consumers as higher network charges on their quarterly power bills.

The company is planning to spend another $1 billion on pointless upgrades to poles and wires over the next two years, potentially adding a further $502 to the annual family power bill, according to the national regulator.

A report commissioned by the Australian Energy Market Commission into recent electricity price hikes revealed that Ausgrid had “overspent” $1 billion on Sydney’s power distribution network between 2005 and 2009.

As one example of the so called “gold plating” pushing up power prices, it was revealed $40 million was spent on a needless substation built on the outskirts of Newcastle which would not be needed for another decade, and which a Senate inquiry has been told was not even connected to the power grid. Another, at a cost of $25 million, was built in Warringah and would not be “cost effective” for at least five years. Ausgrid, which owns and operates the power distribution network for Sydney, the Central Coast and the Hunter, also overspent $83 million on IT services and had paid almost $100 million for land in the Sydney CBD.

“Ausgrid overspent on capex by approximately $925 million compared to the benchmark expenditures set by the regulators,” the report by independent auditors Parson Brinckerhoff revealed.

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A second report by the the Australian Energy Market Operator also revealed that Ausgrid was set to spend another $1 billion in 2013-2015 on network improvements that were not needed.

The AEMO said that if the government cancelled the spending planned for next year, it would save $50 immediately for families struggling to pay their bills and up to $502 in annual savings by 2015.

Both reports have been provided to a federal committee set up by Prime Minister Julia Gillard to investigate the reasons for power price rises in NSW.

“The committee has heard evidence of gold plating by state-owned network businesses and consumers have been paying for this through their electricity bills,” committee chair Senator Matt Thistlethwaite said. “The states have failed to tackle this issue so the committee is considering measures to eliminate over-investment by network businesses and reduce pressure on household bills.”

The AEMO has called for a more flexible cost-benefit approach to future planning for the electricity network.

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