The Australian Competition and Consumer Commission (ACCC) is launching an investigation into NSW energy companies after allegations of pushing up the price of household electricity bills. The consumer watchdog is required to prepare an interim report on the competitiveness of the energy market.
An Inquiry Into The Electricity Market
Following strong debate about how the National Electricity Market has failed consumers and re-regulation may be needed, the ACCC will make a decision whether to scrutinise the behaviour of electricity retailers. The ACCC will consider whether policy makers and regulators should take action to ensure markets are competitive and customers can have confidence in the reliability, security and pricing of energy supply. The ACCC will be given the power to demand information from electricity providers under the Competition and Consumer Act 2010. The inquiry is expected to reveal if there has been any anti-competitive behaviour, and whether the contracts between energy companies and consumers are transparent as part of the Turnbull’s government strategy to maintain energy security and affordability.
Ultimately, the ACCC was directed by the federal government to consider:
- The key cost drivers of retail electricity pricing.
- The existence and extent of any entry barriers in retail markets.
- The impact of vertical integration.
- Whether there is any behaviour preventing or limiting competition or consumer choice.
- The profitability of electricity retailers and whether these profits are commensurate with the risk retailers face.
- All wholesale market price, cost and conduct issues relevant to the inquiry.
Background
Last week, opposition frontbencher Scott Emerson wrote to the ACCC chairman Rod Sims requesting him to examine whether state government-owned power generators deliberately increased power prices. According to ACCC chairman Rod Sims, electricity prices have gone up by 60 to 90 per cent above inflation over the last 10 years. These statistics influenced Mr Sims’ inquiry into whether there was spot price manipulation in NSW that resulted from only a few generators operating.
In March, Prime Minister Malcolm Turnbull and his government pushed for energy affordability by ordering the ACCC to review retail electricity prices due to a push from consumers who believe electricity markets are not operating effectively. As of today, the state government is commanding energy companies to change their practices to ensure lower power prices for families.
Australia’s Energy Market Regulator
Generally, Australia’s national energy market regulator, The Australian Energy Regulator (AER), sets the prices charged for energy networks, such as electricity poles and wires, to transport energy to customers. It is the AER’s role to set prices for energy network charges and ensure compliance in the energy market, including enforcement actions for breaches of energy laws and rules. This explains why the ACCC opposed the NSW Government selling electricity generation company Macquarie Generation to leading integrated energy company AGL.
Powering Through Changes
According to a recent Grattan Institute report, electricity retailing failed to deliver lower prices for consumers. The report said “…consumers find the market complicated that many give up trying to find them. As a result many Australians…pay more than they need to”. The report argued retailers are advertising discounts in a way that is confusing and possibly misleading. According to the report, if a 30 per cent discount is advertised, it can actually be a discount on a small part of the bill, not the whole bill. The ACCC will consider and address these concerns, and make changes that may restore confidence in the electricity market.
Final Thoughts
The ACCC’s Electricity supply and prices inquiry will be handing down its preliminary report by September this year. Further, the ACCC will be given until 30 June 2018 to issue a final report and a paper on its preliminary insights into the strategies and pricing behaviours of key electricity retailers.
Let us know your thoughts on the whether you agree with the ACCC’s decision to investigate into energy prices by tagging us at #lawpath or @lawpath.
