It says the move is “hugely disappointing” and customers would rightly be outraged to know the company isn’t using money collected for investing in renewables in the proper way.

ERM Power has announced it will pay the regulator rather than buy certificates of green power generation to meet its renewable energy target obligations for 2016, citing tax reasons.

“We view the intentional failure to surrender certificates as a failure to comply with the spirit of the law and an undermining of the objectives of the scheme,” regulator chair Chloe Munro said.

“It’s our view that an investment in a growing industry is money better spent than a financial penalty that has no return.”

ERM customers were charged prices that included a component to pay for extra renewable energy generation, she said.

“We believe many customers would be disappointed to know that this money has not been used for the intended purpose.”

The renewable energy target works by allowing generators of renewable energy – both large-scale and small systems such as household solar panels – to create certificates for the electricity they generate.

Electricity retailers buy those certificates and have to surrender a certain number of them to the regulator each year, as a way of ensuring they use an amount of renewable energy.

In a statement to the stock exchange, ERM said the price for the large-scale generation certificates had more than doubled to nearly $90 each, while the penalty to the regulator was valued at $65 per certificate.

The company said it continued to meet other green power obligations and supported the principles of the renewable energy target.

Munro said on the whole, the energy sector took a responsible approach to its obligations and there had been a recent uptick in new projects supported by large electricity retailers.

The Clean Energy Council compared ERM’s decision to demolishing a heritage-listed building and paying the fine afterwards.

“While it might be in the private interest of the developer, it is at distinct odds with the law and the public interest,” chief executive Kane Thornton said.

“There are no excuses for this decision and I expect ERM Power customers will be surprised and disappointed to learn of it.”

Thornton called on the NSW and Queensland governments, big customers of ERM, to question the company given it could have invested in renewable energy projects that helped both state economies.

Until now there has been 99.4 per cent compliance with the RET, so while a few companies have paid penalties there’s been nothing in the scale of ERM’s.

– AAP