Client Update: ACCC makes 56 recommendations for sweeping energy sector reform
11 July 2018
In brief: The ACCC today released its final report on the Retail Electricity Pricing Inquiry. The report finds the national electricity market is not functioning effectively and that extensive reform is required to bring down prices and restore consumer confidence. It makes 56 significant recommendations aimed at boosting competition in generation and retail markets, lowering supply chain costs and improving consumer and business experiences and outcomes. Partners Kon Stellios and Robert Walker (view CV), Senior Associate Sophie Matthiesson and Associate Darcy McLennan report.
In The Retail Electricity Pricing Inquiry – 'Restoring electricity affordability and Australia's competitive advantage' (the Report), the ACCC calls for a 'reset' of the National Energy Market (NEM), noting that the policy, regulation and promotion of competition in the electricity sector has not worked well for consumers.
The Report concludes that electricity prices have reached an 'unacceptable and unsustainable' level, and that this has largely been caused by poor government policy.
The ACCC does, however, endorse the National Energy Guarantee, which it considers should assist in promoting affordable electricity throughout the supply chain, provided adequate safeguards are put in place.
The key recommendations contained in the Report are to:
- limit companies with 20 per cent or more market share from acquiring more generation capacity;
- improve the Australian Energy Regulator's (AER) powers to investigate and address market manipulation and increase penalties for serious wrongdoing;
- voluntarily write down network overinvestment (gold-plating), or establish equivalent rebates to be passed on to consumers;
- improve transparency of over-the-counter contract trading in wholesale hedging by requiring reporting of these trades to a central registry;
- introduce government support to promote investment by new players in generation capacity to help commercial and industrial customers and drive competition;
- restructure Queensland generators into three separately-owned portfolios to improve competition;
- abolish retail 'standing offers' and replace them with a 'default offer' that is consistent across all retailers and is determined by the AER;
- require retailers to link discounts to the 'default offer' price and prohibit the inclusion of pay-on-time discounts in the headline discount claim;
- establish a mandatory code for comparator websites that offers are recommended based on customer benefit, not commissions paid; and
- require state governments to fund premium solar feed-in-tariff schemes (rather than electricity users generally) and phase out the small scale renewable energy scheme.
|Retail market concentration is a significant issue||
|The customer experience in retail electricity is poor||
|Wholesale market concentration and generation shortage||
|Generator behaviours alleged to aggravate these challenges||
|Network costs are excessive and entrenched||
The ACCC's report has been provided to Scott Morrison, the Treasurer. We expect the Government to issue a response to the report in the near future.
- Fiona CrosbieChairman,
Ph: +61 2 9230 4383
- Jacqueline DownesPartner, Practice Group Leader, Competition, Consumer & Regulatory,
Ph: +61 2 9230 4850
- Carolyn OddiePartner,
Ph: +61 2 9230 4203
- Ted HillPartner,
Ph: +61 3 9613 8588
- Robert WalkerPartner,
Ph: +61 3 9613 8879
- Rosannah HealyPartner,
Ph: +61 3 9613 8421
- John HedgePartner,
Ph: +61 7 3334 3171
- Felicity McMahonManaging Associate,
Ph: +61 2 9230 5242
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