ACCC says increased electricity competition could lead to household savings

11 July 2018

ACCC says increased electricity competition could lead to household savings

The Australian Competition and Consumer Commission (ACCC) says households could save up to $415 a year on power bills if its call for a boost to competition in the electricity market is implemented.

In a report released on Wednesday, the ACCC blames low competition and policy mistakes for increases in power bills, and criticises the current state of the electricity market for being “unacceptable and unsustainable”.

“It is clear that most households are paying too much for electricity,” ACCC chairperson Rod Sims said.

“In addition, some of the most vulnerable in our community are forced to struggle through freezing winters and scorching summers with many others also having difficulty paying their bills.”

The ACCC has criticised confusing price structures that discourage consumers from comparing retailers, resulting in consumers incurring excessive charges.

Mr Sims said the standard price should be a new default offer that is consistent across all retailers.

According to Mr Sims, consumers who didn’t shop around had “been taken advantage of” but this is “now going to end, by having the Australian energy regulator set the price for those who don’t engage in the market.”

This will bolster consumer confidence when comparing competing offers, the competition and consumer watchdog says.

The ACCC is also pushing for a crackdown on comparison websites, to ensure that they reflect the best option for the consumer, and not the highest commission received by the website.

Mr Sims said the ACCC’s recommendations would reduce electricity prices by 20–25% for the average household, resulting in savings of between $290 and $415 per year.

Tony Wood, Energy Program Director at the Grattan Institute think tank, agreed with the ACCC’s findings that concentration in the energy market has resulted in a lack of competition.

“Some of that has happened through past mergers and acquisitions, some through government ownership, and some through plants closing down and leaving the existing ones with a high market power,” Mr Wood said.

The ACCC recommended the introduction of a limitation on mergers and acquisitions by a company with more than 20% of the existing electricity generation market share, although it would not prevent companies investing in new generation facilities.

One recommendation has also been welcomed by “pro-coal” MPs.

Recommendation 4 says the government “should operate a program under which it will enter into low fixed-price (for example, $45–50/MWh) energy offtake agreements for the later years (say 6–15) of appropriate new generation projects which meet certain criteria”.

Resources Minister Matthew Canavan and backbencher Keith Pitt have expressed their support for the recommendation that the government enter into long-term energy deals to support new, low-cost power generation.

“The ACCC has recommended the government underwrite baseload power investments. Once again common sense of @The_Nationals is vindicated!” Senator Canvan tweeted.

Mr Pitt, who has led a push for the Government to support investment in coal-fired power, said that “the ACCC report, in my view, supports some of the proposals which have been put forward [by the Nationals]. Whether it is reverse auction with long-term contracts or equity investment, the government needs to get involved to deliver lower prices.”

Federal Treasurer Scott Morrison said the Government will develop a response by the end of 2018, while working closely with State and Territory governments on the ACCC recommendations that are actionable at both levels of government, but said that some aspects of the ACCC’s report can only be addressed by individual states.