Australian regulator calls for lower tariffs

09 October 2018 Week 40 Issue 478

Electricity providers in Australia have been ripping off domestic and commercial customers for years and have only themselves to blame if the federal government carries out a threat to intervene in the market, the Australian Competition and Consumer Commission (ACCC) said.

The government is considering forcing suppliers to reduce prices following a set of recommendations in a one-year study made by the ACCC.The suppliers, some of whom are both generators and distributors, have confused and duped consumers with a range of unnecessary tariffs, ACCC Chairman Rod Sims told a Sydney conference.

Among other measures, Sims called for the compulsory write-down of what he termed over-inflated electricity network valuations. Such a move could reduce both domestic and business tariffs by up to 25%, he said.

The “distortion of unnecessarily high network costs,” was having an impact on the economy and could persuade some companies and industries to leave Australia for less expensive locations, Sims said.

The ACCC recommendations from its year-long study included stopping large companies which operated both electricity generation and retailing from charging large premiums on the sale of wholesale electricity to their own retail operations. It also suggests there should be a block on companies with more than 20% of generation market share acquiring more capacity via merger or takeover of another company.

The federal government of Scott Morrison, who became Prime Minister only in September after a political upheaval within his own party, has already signalled it might some action against generators and distributors. Morrison has suggested forced divestments and a regulated basic power price.

However, some analysts said although the government might force down electricity prices initially, the continuing overall uncertainty in Australia’s energy sector could drive up prices in the longer term. Morgan Stanley research said generation costs were already falling and forecast retail prices to drop by up to 5% by 2021.

Australia has been grappling with a series of reports by various federal agencies calling for reform of the power sector following several significant power blackouts in some states, blamed on freak weather but pointing to tight power supply because of the closure of some baseload coal-fuelled power plants and heavy reliance on intermittent solar and wind systems, NewsBase Intelligence said.

Edited by

Richard Lockhart


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