Adrian Merrick, former group executive manager of retail at EnergyAustralia, said the “gentailers” — power generators and retailers — were reaping record profits from the high wholesale price of electricity, when the underlying cost of actually producing that energy hadn’t changed.

Last year, AGL and EnergyAustralia hit customers with price increases of up to 20 per cent, blaming higher wholesale costs following the closure of coal-fired power stations such as Hazelwood in Victoria’s Latrobe Valley.

Both companies last week announced a tripling of profits, courtesy of higher wholesale margins.

“AGL generated the same amount of energy as last year, yet they made nearly $668 million more profit from that generation, all of which is paid for by hard done-by customers,” Mr Merrick said.

“You may remember the price increase in July last year was 16 per cent for customers, and they blamed that on wholesale prices. They said, ‘Wholesale prices have gone up so we’ve got to pass it on to you’.

“What they failed to declare is they are making all of that plus more through the wholesale side. What happens is one part of the business generates it, then they sell it to the guy down the corridor at the market price (and make money on the difference).”

Australia’s energy is created by power generators and “pooled” into a central market — the National Electricity Market (NEM) on the east coast and the Wholesale Electricity Market (WEM) in Western Australia. Energy retailers buy power from the market and then sell it onto consumers.

Mr Merrick, who now runs a small “social enterprise” energy retailer called Energy Locals, said businesses like AGL were “able to go out and blame the wholesale market and then turn around a year later and hope everyone’s forgotten about the price change announcement”.

“It’s just a f***ing joke, it really is,” he said. “These games have got to stop.”

He likened it to a situation where Coles and Woolworths own the majority of dairy farms in Australia. “They sell some of the milk to themselves and they also sell some of the milk to smaller shops such as IGAs, milk bars, cafes and petrol stations,” Mr Merrick said.

“Their internal cost of producing milk remains broadly the same. However, by shutting down a few farms there’s less milk in the market. The market price for milk increases, even though their internal cost of production is flat.

“They then pass through a huge price increase to their customers and blame the market price. Because their internal costs stay the same, they post record profits. Customer prices stay high, however.

“They then bid in the market in a way that makes it hard for the smaller shops to buy milk and sell it at anything other than a price that’s higher than Coles and Woolies.

“Again, they benefit from these higher prices. If Coles and Woolies customers complain, they’ll discount just to them but will still make money due to the gap between the cost of generation.”

AGL, however, said it was important for energy companies to be able to reap profits on their investments because it enabled them to “invest in new generation projects”.

The company will invest more than $2 billion in new generation to make up for the shortfall after the closure of the Liddell coal-fired power station in 2022. That will include $400 million to upgrade the Bayswater coal plant, plus $1.3 billion for two wind farms at Coopers Gap in Queensland and Silverton in NSW.