Why would anyone listen to ACCC advice on energy?

The ACCC is breathing fire, via The Australian:

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.

And Domainfax:

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 said the government can back investment in dispatchable generation such as gas, batteries, or pumped hydro storage for smaller generators to break market monopolies.

…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.

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”.

The gentailers do need a good whipping so why endorse the NEG which entrenches their power? Moreover, where’s the recommendations on gas? The major reason that gentailer power has become an issue is that the gas price skyrocketed, triggering all kinds of generation shortages that make gaming of the wholesale bidding system possible. The ACCC has again refused to canvas domestic reservation for gas, the only policy solution that has actually lowered power prices.  This follows on from the regulator being singularly responsible for allowing the gas export cartel to seize a monopoly of reserves in the BG, Shell and Arrow transactions in the first place.

The fact is the ACCC has been a key agent in the formation of the east coast energy disaster and looking to it for answers is like asking Lehman Brothers for advice on mortgage regulation.

The AER does better job, via Reneweconomy:

The Australian Energy Regulator has drawn fire from the nation’s poles and wires businesses over a draft decision the networks say would result in the largest single cut to the amount the sector could recover on their investments in electricity and gas infrastructure.

In a draft Rate of Return Guideline, released on Tuesday, the AER says it had decided to reduce the return on debt energy network businesses could claim for the build out of more poles and wires and other network infrastructure.

The AER says it estimates that its draft guideline would result in a 45 basis point reduction in the overall rate of return for network businesses, compared to its previous determination in 2013.

The decision has been made, the regulator says, to better foster efficient investment in electricity and gas services, and to ensure the businesses acted in the consumers’ best interests, by keeping costs passed on through energy bills to a minimum.

There have been two $80bn misallocations of capital in east coast energy. The second was the Curtis Island LNG monstrosity. But before that came the great poles and wires build-out that “gold-plated” networks just as the energy decentralisation revolution loomed. The AER is dead right to attack it.

Comments

  1. If Australia had a shrinking population, the electricity demand would have peaked in 2000 and gold-plating might not have happened at all.

    Even a regulator with an IQ of 70 would have stopped gold plating if electricity demand was shrinking year on year.

  2. Stormy WatersMEMBER

    The AER is the ACCC, it’s a specialist division (although has a separate board). This report is primarily a power grab by the ACCC/AER.

Leave a reply

You must be logged in to post a comment. Log in now