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Cap energy mergers to bring down power bills, ACCC tells Malcolm Turnbull

Cap energy mergers to bring down power bills, ACCC tells Malcolm Turnbull

Electricity generators with at least a 20 per cent market share would be banned from merging or buying rivals while regulators would have greater powers to crack down on market manipulation under proposed measures to spur competition and reduce power bills for households and businesses.

As Prime Minister Malcolm Turnbull faces renewed backbench pressure over energy costs, the Australian Competition and Consumer Commission's long awaited report on the retail electricity market will unveil a suite of recommendations it claims will save consumers hundreds of dollars annually.

In a major boost for Mr Turnbull and Energy Minister Josh Frydenberg, the competition watchdog endorses the Coalition government's National Energy Guarantee and accuses retailers of confusing and misleading customers over price discounts, calling for it to be made easier to shop around for a better deal.

Warning the energy sector is facing its most challenging time, the ACCC argues that reforming the National Energy Market would "bring down prices and restore consumer confidence and Australia's competitive advantage".

The report also urges handing the Australian Energy Regulator increased monitoring powers aimed at preventing market manipulation, addressing complaints generators had engaged in strategic bidding to the National Energy Market to force up wholesale prices.

ACCC chairman Rod Sims has long been critical of the lack of competition in the energy generation sector, especially in Queensland where the state-owned power companies control almost two-thirds of the market.

The release of the competition watchdog's report comes as the AER has significantly cut the amount of revenue electricity network companies can charge customers to take the pressure off households and businesses enduring high power prices.

But energy network companies claim the new guidelines will strip about $2 billion in revenue over the next five years and threaten future investment in the sector and energy security.

In a decision that will be welcomed by Mr Turnbull, who will be making a speech on energy in Brisbane today, AER chair Paula Conboy said the draft decision would result in average household electricity bills falling by about $30 to $40 a year.

After years of claims about the "gold plating" of the network by electricity companies, Ms Conboy said the new five-year draft determination struck the right balance between system reliability and energy affordability,

"It is vital we get this guideline right. Ultimately it is consumers that foot the bill for network costs and in an era of major concerns about energy affordability, this proposed change will have an impact on Australian businesses and households for years to come," Ms Conboy said.

Mr Turnbull's speech will focus on the government's consumer-driven efforts to date to bring down power costs and improve reliability in the system.

The Prime Minister will not commit to all of the ACCC's recommendations, with many issues requiring further work by the Commonwealth and the states.

But Mr Turnbull is expected to use the ACCC's report to attempt to hose down a push by the Greens and some of his own backbench for a royal commission into electricity prices.

Internal anger is growing within the Coalition over the failure to explicitly support investment in coal-fired power generation as a concession to stop Labor states vetoing the NEG, despite warnings from Nationals leader Michael McCormack against picking a fight.

One MP said the spectre of the policy being developed to win the endorsement of the ACT's Climate Change Minister Shane Rattenbury, who is a Green, was causing a lot of disquiet and that former prime minister Tony Abbott's call to walk away from the Paris climate pact was electorally popular.

The MP predicted that if Mr Abbott and several other MPs crossed the floor to vote against the NEG, that would create a critical mass giving cover to others to follow and signal to their constituents where they stood.

"Tony has cut through," the MP said. "Punters get it: if we ditch Paris we will have lower prices."

Labor has attempted to wedge Mr Turnbull over another royal commission, with Labor's energy spokesman Mark Butler saying it was up to the Turnbull government to show why a public inquiry was not needed.

"Right now, it's understandable why people would think that it is. Australians have seen power prices skyrocket under Malcolm Turnbull's government," Mr Butler said.

"The Turnbull government and the big electricity giants need to show the Australian people that a royal commission into electricity prices isn't necessary."

The ACCC's blueprint outlines a series of reforms across generation, transmission and retail to restore efficiency, fairness and competition to the national electricity market.

Taking aim at generators with retail operations - the so-called "gentailers" - the ACCC argues these players often charge a large premium on the sale of wholesale electricity to their retail arms and need to be reined in.

Among the recommendations is capping any further merger or acquisition by a company with more than 20 per cent generation market share. If they wanted to get bigger, they would have to build new generation capacity.

Such a restriction would capture AGL and Origin in NSW, AGL, Energy Australia and Snowy Hydro in Victoria, CS Energy and Stanwell in Queensland and Hydro Tasmania in Tasmania.

The ACCC report recommends that governments should also offer support to help underpin long term contracts for large commercial and industrial as a way to encourage new dispatchable generation from smaller players.

On the retail front, the ACCC argues discounts are misleading and need to be made fairer for consumers. These include letting consumers compare discounts against a default or benchmark rate set by the AER and requiring third party comparator websites declare commissions they receive from energy companies for funnelling customers their way.

Customers should be able to switch providers more quickly to take up better offers, while small business customers should get access to the same rules as households, the report says.

The ACCC also wants pay on time discounts overhauled, saying they effectively act like a harsh late penalty for customers who are late with paying their bills.

Financial Review

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