The energy industry says it welcomes an Australian Competition and Consumer Commission inquiry into retail competition in the electricity market.
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The ACCC has been given until June 2018 to table its report. An interim report is expected within six months.
The inquiry will cover, the key cost drivers of retail electricity pricing; the existence and extent of any entry barriers in retail markets; the impact of vertical integration; whether there is any behaviour preventing or limiting competition or consumer choice; the profitability of electricity retailers and whether these profits are commensurate with the risk retailers face; and, all wholesale market price, cost and conduct issues relevant to the inquiry.
The Australian Energy Council’s chief executive, Matthew Warren, welcomed the Inquiry.
“We are confident (the inquiry) will bust the myth that competitive retail electricity markets are the problem,” he said.
“We don’t need an Inquiry to tell the federal government why electricity prices are increasing. They are increasing because we are running out of electricity.
“We are running out of electricity because for the past decade we haven’t had clear, consistent national energy and climate policy.”
Mr Warren said focusing on the operation of the retail electricity market won’t improve energy security nor will it bring down the rising cost of electricity.
Essential Energy’s manager network regulation, Natalie Lindsay, said the inquiry is consistent with recent discussions initiated by our peak national body, Energy Networks Australia.
“Network charges are regulated and approved by the Australian Energy Regulator (AER) and apply to customers who are connected to Essential Energy’s distribution network,” she said.
“These prices are subject to annual review in accordance with pricing determinations by the AER.
“Around 50 per cent of a customer’s electricity bill comprises network charges, while the remainder is made up of wholesale, retail, and environmental policy costs.
“Essential Energy’s distribution network customers choose their retailer and are encouraged to compare different retailer offers to ensure they are getting value for their circumstances.
“Our network charges are often not visible to customers on their retail bill.”
Competition in retail electricity markets should mean lower prices for customers, but retail electricity markets don’t appear to be operating as effectively as they could.
- Federal MP Luke Hartsuyker
Since July 2012, Essential Energy has been undertaking ongoing reforms to improve safety performance, operate at best industry practice, put downward pressure on network charges, and enable the business to respond to changing customer expectations and a rapidly evolving energy sector.
Federal MP Luke Hartsuyker also welcomed the announcement and said the review would help address one of the challenges in providing affordable, reliable electricity for Australian families and businesses.
“The practices of electricity retailers are one of the key elements that determine the cost of electricity for consumers, so I’m very supportive of the review,” Mr Hartsuyker said.
“The Government has instructed the ACCC to scrutinise electricity retailer behaviour as well as contracts offered to residential and business customers to ensure consumers benefit from competition in the National Electricity Market.
“Competition in retail electricity markets should mean lower prices for customers, but retail electricity markets don’t appear to be operating as effectively as they could.
“The ACCC inquiry will examine whether retailers’ margins and profitability are in line with their costs and risks. The inquiry will also consider important issues such as transparency and clarity in consumer contracts.
“Importantly, the inquiry will also consider the competitiveness of the services available to business customers.
“The Government is focused on practical measures to provide reliable, affordable electricity to power Australian homes and businesses.
“In addition to the ACCC inquiry, we are also delivering the Snowy Mountains Scheme 2.0, which will increase its generation capacity by 50 per cent by adding 2000 megawatts of renewable energy capacity. We are also investing in new energy storage capabilities.”