In 2017, the profits of energy companies Origin, AGL and Energy Australia came under scrutiny due to increasing power prices, as explained in the article “Origin, AGL and Energy Australia's profits under government scrutiny” by Cara Waters which was published in the Sydney Morning Herald on 25/8/2017 (this article is attached separately in the case study folder). The article made the following specific observations: “Energy Minister Josh Frydenberg has pointed the finger at the growing profits of electricity retailers including Origin and AGL as pressure continues over soaring power prices”, “"About 12 per cent of your energy bill relates to retailers, that's the Origins, the AGLs the Energy Australias," and "They in Victoria particularly have seen profit margins in the vicinity of 22 per cent. That is three times what you would see in a comparable retailer in the United Kingdom and more than double what you would see in other retail sectors like fuel or food or vehicles." Refer to the attached article and answer the following questions:

1. Define the term “political costs” and explain how “political costs” may be imposed upon the energy companies referred to in the article as a result of their reported profits.

2. Explain the comments of the then Energy Minister Josh Frydenberg in the context of PAT.

3. How would PAT anticipate that the energy companies would respond to the comments of the then Energy Minister? 

4. Why did the media article not refer to the accounting policies of the energy retailers when their profit margins were discussed

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1 The term political ... View the full answer