Consumers could save hundreds of dollars a year on their power bills if legal changes boosted competition among electricity wholesalers and retailers, the competition watchdog has said.
A report by the Australian Competition and Consumer Commission, to be released on Wednesday, calls for new powers for the Australian Energy Regulator to target “market manipulation” and a reset of the national energy market to reduce “unnecessary costs” such as network charges.
The report also lends support to the Coalition’s proposed national energy guarantee before a crucial meeting in early August between state and territory ministers to debate the design of the Neg, as the government stares down an internal revolt from Tony Abbott on emissions reduction.
But the ACCC report also adds to internal debate in the Coalition, suggesting the government should underwrite dispatchable power amid a push from some Nationals and Queensland LNP MPs for coal-fired power.
The ACCC report criticises the current state of the electricity market as “unacceptable and unsustainable”.
The report said that large companies engaged in both electricity generation and retail 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 recommended that there should be a cap on any further merger or acquisition by a company with more than 20% generation market share, although building new generation would be allowed.
The report warned consumers face a “confusing and unfair” market including “misleading” discounts and on-time discounts that operate as harsh late penalties when not met. It recommended the Australian Energy Regulator set a default or benchmark rate for households and small businesses to compare discounts.
The ACCC also recommended changes to speed up customer transfers to take advantage of better offers and that third-party comparator websites should declare commissions to help compare deals.
The report found there was a case for government funding to support long-term contracts for large commercial and industrial users to bring on new dispatchable generation from players currently without a large market share.
On Wednesday Malcolm Turnbull will address the Queensland Press Club in a speech with a strong focus on power prices.
Resources and Northern Australia minister Matt Canavan seized on that, arguing that the recommendation “the government underwrite baseload power investments” had “vindicated” Nationals’ calls for baseload power such as coal.
The ACCC has recommeded the government underwrite baseload power investments. Once again common sense of @The_Nationals is vindicated!
— Matthew Canavan (@mattjcan) July 10, 2018
The energy and environment minister, Josh Frydenberg, told ABC’s AM the recommendation acknowledged there was “a degree of market failure where new generators are struggling to get sufficient debt finance”.
But he said it related to “outcomes not inputs” and noted the ACCC “does not specify what form of technology or generation mix should be used”.
Labor’s climate change spokesman, Mark Butler, said the ACCC report showed the “energy crisis” under the Coalition had caused “skyrocketing electricity and gas prices”.
“Under Malcolm Turnbull, households have seen their energy bills rise by up to $630 just in the past year,” he said. “The Coalition is too divided to put in place the policy certainty needed for investment – which has been a key driver of higher power prices.”
In May Frydenberg said he was “worried” about the level of market concentration in the electricity sector “and what that means for consumers”.
The head of the ACCC, Rod Sims, has agreed that a lack of competition in the energy sector is inflating power prices for consumers, although he rejected accusations from some government MPs that AGL was misusing its market power by refusing to sell the Liddell coal power station to a rival.
A recent report by the Grattan Institute said wholesale electricity prices rose across the national electricity market by 130% on average between 2015 and 2017, with household bills in some states increasing by up to 20% in 2017 alone.
A separate report from the Australian Energy Market Commission sounded the alarm over comparator websites offering consumers advice about their electricity plans, saying the sites lacked transparency and possibly inflated power prices.
The ACCC report strikes a hopeful note that reforming the market can “bring down prices and restore consumer confidence and Australia’s competitive advantage”.
“Significant gains can be made for consumers and businesses,” it said, by restoring competition to ensure the market works in the interests of end users.