What’s being done to help the ‘dysfunctional’ energy market

Dysfunctional, confusing and excessive: three words the Australian Competition and Consumer Commission (ACCC) have used to describe the energy market.

On Friday, the competition watchdog released its first electricity monitoring inquiry, detailing how the ACCC plans to monitor the supply of retail and wholesale electricity across QLD, NSW, VIC, SA, TAS and the ACT as well as the developments since the ACCC’s retail electricity pricing inquiry (REPI).

And with plans to release a report every 6 months, when necessary, the ACCC has also made recommendations to governments to take action against any failures in the market.

“We will be looking at the behaviour of suppliers with the objective of helping consumers access affordable electricity. To this end we will also be monitoring the implementation of the 56 recommendations we made in our REPI report, and the impact they have on the market,” said ACCC Chair, Rod Sims.

“Under this new inquiry, we will be closely monitoring all parts of the supply chain in the electricity sector for the next seven years, in an effort to improve affordability.”

While the ACCC were satisfied with the recommendations for a default offer and reforms to conditional discounts being implemented by the government, the regulator body said they would still be keeping an eye on retailers.

“The ACCC will enforce new provisions in limiting excessive standing offers and making advertising clearer. Competition and transparency from or inquiry will keep pressure on retailers to continue to offer discounts for customers who are already paying less than the new default offer,” said Sims.

Improving the market one recommendation at a time

One area acknowledged in the REPI report that required improvement were high wholesale electricity prices, with the ACCC recommending the introduction of an underwriting scheme for new investment in generation, to welcome new entrants into the wholesale market.

“The ACCC will continue to monitor prices and competition in the wholesale market and will call out any conduct, market failures and barriers to entry that result in higher prices,” said Sims.

Solar subsidies were another area that would need to be reconsidered as Sims believes they are no longer necessary and should be abolished by the Commonwealth government.

“The subsidy for small-scale installations is no longer required given the dramatic fall in the cost of rooftop solar since the start of the scheme in 2011,” he said.

“It’s become economic for many households to install solar panels, so there’s no reason why other users should subsidise this.”

Another recommendation that had not been put into practise was to write down the value of overly-invested electricity networks in order to lower prices for customers.

Charges that network owners pass on to retailers and customers are influenced by the network asset values - the higher the value, the bigger the cost a network can charge.

“Residential consumers in Queensland, NSW and Tasmania continue to pay an average of $100 more a year because our proposal to write down the value of these assets has not been taken up,” said Sims.

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