Allegations electricity networks and gas companies are gouging customers hundreds of millions of dollars to pay their corporate tax bills will be investigated by the energy regulator.
Federal Energy Minister Josh Frydenberg has announced the Australian Energy Regulator probe amid suspicion energy companies are overcharging customers by as much as $400 million a year.
He said tax office analysis between 2013 and 2016 has revealed a discrepancy between the tax allowances the regulator previously set for network businesses and the amount they actually pay.
"It is totally unacceptable for consumers to be charged for corporate tax liabilities that are not actually incurred," Mr Frydenberg said on Tuesday.
"The Turnbull government wants to ensure consumers are paying no more for their energy than they have to."
Prime Minister Malcolm Turnbull wasn't sure whether the estimated $400 million could be recovered.
"But if they are charging for costs they don't have they may well be obliged to pay compensation," he told 3AW radio.
He said the practice was alleged and was now being investigated.
Treasurer Scott Morrison said the government would act on the inquiry's recommendations.
"They can't be taking customers for a ride on these things," he told reporters in Townsville.
"I would hope that is not the case. But we wouldn't be initiating this investigation if we weren't concerned."
An initial report from the regulator is expected mid-year, with a final report to go to COAG energy ministers by December.
Australian Associated Press