ACCC calls for major reset of energy sector to drive down power bills
The consumer watchdog has called for a major overhaul of the energy sector, and for the government to back new electricity generation to drive down power prices.
In the Australian Competition and Consumer Commission’s electricity sector report released on Wednesday, it called for regulators to have more power to stop ‘market manipulation’ and said the government must support new generation if it is linked to industry.
The ACCC is calling for a restructure of the energy sector, and for the government to back new electricity generation to drive down power prices.
The ACCC said the government can back investment in dispatchable generation such as gas, batteries, or pumped hydro storage for smaller generators to break market monopolies.
There is a case for government support to underpin long-term contracts for large commercial and industrial users that brings on new dispatchable generation from players that don’t already have a large market share, the ACCC said.
The review also advocated for new rules to alter existing market power strangleholds.
It said large generator and retailers (gentailers), such as AGL, Origin and EnergyAustralia, have a strong position in the market and often charge a large premium on the sale of wholesale electricity to their own retail operations.
These wholesale prices have risen on average by 130 per cent between 2015 and 2017. Gentailers have passed these costs onto consumers, driving up power bills.
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The ACCC stated there should be a cap on any further merger or acquisition of a company with more than 20 per cent market share of generation to stop monopolies arising, but this would not apply to companies building new generation.
The watchdog has also called for the Australian Energy Regulator to have greater monitoring powers “to target market manipulation”.
As part of these powers, the ACCC said the AER should set a new default base rate for power, which would allow consumers to compare their discounts against a common benchmark.
This would remove confusion around many discounts on the market, which the ACCC have labelled as deliberately misleading or confusing for consumers.
The AER has recently exercised some of its powers in order to investigate claims that networks were price-gouging customers at around $600 million annually.
Energy retailers have already acknowledged the industry needs to change, with many of the large generators telling Fairfax Media they have made company-led reforms in the last months to drive down electricity prices for consumers.
It came after the Australian Energy Market Commission found confidence and trust in the electricity market has dropped to a historical nadir, with consumer faith in the industry lower than that in the banking, mobile and broadband industries.
The ACCC said the National Electricity market needs a reset and by tackling reform in the national electricity market can bring down prices and restore consumer confidence and Australia’s competitive advantage.
It said significant gains can be made for consumers and businesses by adopting the recommendations in the report.
The ACCC has also backed the government’s energy reform policy, the National Energy Guarantee, stating it should implement it in order to drive these consumer gains.
Thursday, July 12, 2018
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