Power rip-offs: ACCC lines up energy giants.
Author: The Australian Date Posted:11 July 2018
The competition watchdog has called for radical reform of the National Electricity Market to bring down prices, claiming the gouging of households and business consumers has reached an “unacceptable” level with widespread abuse of market power by the larger energy companies.
Recommending the most significant shake-up of the power sector since the NEM was established by Labor prime minister Paul Keating in 1995, the Australian Competition & Consumer Commission has told the federal government the current situation has become unsustainable, with customers being ripped off by “hundreds of dollars a year” in unnecessary costs. The sweeping investigation into retail energy pricing by the ACCC, commissioned by the Turnbull government last year, with a final report to be released today, has savaged the sector and called for a “reset” of the market to bring down prices and restore confidence.
While it expressed support for the Turnbull government’s national energy guarantee, the ACCC report found that the market it would be expected to operate in was broken and consumers faced an “unfair” and “misleading” system.
One of the key recommendations is for government to effectively underwrite the construction of new dispatchable power sources — either baseload coal or gas — by guaranteeing long-term contracts for large industrial and commercial users.
This would make it easier to attract finance for operators that do not already have the advantage of a large market share, and provide investment incentive and certainty. In a bid to rein in the market power of the energy giants, the ACCC has also recommended that any company with more than 20 per cent market share in generation be banned from any further mergers or acquisitions. This would not apply to the construction of new generation.
The report found that large “gentailers” — vertically integrated companies that own both retail and generation businesses — had manipulated prices by charging large premiums on the sale of wholesale electricity to their own retail operations.
State governments needed to do more to bring down network costs — the so-called “gold plating” of the transmission network — that make up the bulk of a household energy bill.
Greater powers should be provided to the Australian Energy Regulator to address “market manipulation”, according to a summary of the report, while discounting schemes that can mislead consumers needed to be more tightly regulated.
The final report of the inquiry, commissioned in March last year by Treasurer Scott Morrison, will be released this morning by ACCC chairman Rod Sims ahead of a headland energy speech to be delivered by Malcolm Turnbull in Brisbane.
The government is not expected to formulate a response to the report immediately. Sources claim it is likely to adopt the bulk of the recommendations.
It comes as the Prime Minister and Energy Minister Josh Frydenberg stare down a minor rebellion in the Coalition partyroom over the NEG and accusations it is too heavily weighted against coal and in favour of renewables.
Mr Frydenberg told The Australian last night: “The Turnbull government has a laser-like focus on reducing power prices.
“Our plan is working and now the ACCC has provided a comprehensive report with significant recommendations for further reform. It deserves careful consideration and will require consultation with the states, a process the commonwealth will undertake.”
The report has found misleading practices by energy retailers in discount offers, with a recommendation that a benchmark be set by the regulator for consumers to compare against rival offers.
It has also recommended that the transfer of customers to new discounted offers be hastened and the offers be extended to small business customers as well, while price comparator sites be forced to declare any commissions from retail energy providers.
Most of the reform recommended in the ACCC report would fall to state and territory governments.
Mr Sims, who was formerly head of the independent Pricing and Regulatory Tribunal in NSW, has been a long-time critic of the network costs, which have only recently begun to fall.
The report suggests that the market is no longer operating as it was intended and claims that the current conditions are “unacceptable and unsustainable” and that network charges need to come down. By reforming the way the market operated it would “bring down prices and restore consumer confidence and Australia’s competitive advantage”.
The investigation was commissioned because of concern about rising power prices, with the focus on the supply of retail electricity and the competition in retail pricing.
The ACCC was asked to investigate the impact of vertical integration — companies that owned both generation and retail business — anti-competitive behaviour, price transparency and profits of power companies and their relationship to consumer pricing. The report claims that “significant gains can be made for consumers and businesses” if the government adopts the recommendations in the report.
The Prime Minister will today address the Queensland Media Club and is expected to build on an energy speech last year that focused on reliability, generation and storage. Today’s speech will focus solely on the retail politics of bringing prices down for consumers.
By Simon Benson - National Affairs Editor
