Australia's Electricity Market Is Trash: ACCC

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"Significant concerns", for the ACCC, is basically DEFCON 1. It's six stars in Grand Theft Auto. It's "giant state-wide blackout in SA" serious. The ACCC doesn't pull out its big guns often.

And the ACCC has "significant concerns" with Australia's national electricity market.

The preliminary report details what it calls "serious problems with affordability" when it comes to the way our country's National Electricity Market is operated. The report received over 150 submissions in the last six months, as well as holding public forums around the country, and its initial findings are painful.

Across NSW, Victoria, South Australia, Tasmania and the ACT, energy prices have risen 63 per cent above inflation in the last decade. (Western Australia and the NT aren't part of the National Electricity Market, and so aren't covered by the feedback or recommendations in the report.) Higher wholesale costs from the cost of network operation is the main driver of that rise everywhere except SA, where the cost of energy generation is responsible.

The big ticket item is the closure of several baseload coal power generation plants, especially in SA, which has pushed generation onto gas power -- and rising gas prices mean that prices for consumers rise accordingly, if not worse. Smaller retailers are also struggling to compete with the triumvirate of AGL, Origin and Energy Australia.

The ACCC's chairman Rod Sims says that electricity users' hip pockets are the ones being stretched, though, and more often than not it's because of the behaviour of electricity retailers: "Many of these issues arise from unnecessarily complex and confusing behaviour by electricity retailers, and in some cases this appears to be designed to circumvent existing regulation."

This financial year, it's likely that Queenslanders will have the highest energy prices in the NEM, while Victorians will have the lowest. A "range of factors" including usage patterns are responsible for that, but one contributing element is the prevalence of gas-fired power plants in Victoria.

The full report, made available to the Treasurer in June of next year, will make recommendations on how to fix the mess -- if it's at all possible, due to the existing structures that have been set up by government deals with electricity suppliers in different states.

Increased generation capacity (particularly from non-vertically integrated generators), preventing further consolidation of existing generation assets, and improving the availability and affordability of gas for gas fired generation, could all help to take the pressure off retail electricity bills.

The ACCC will also seek to identify ways to mitigate the effect of past decisions around network investments on retail electricity prices, noting that many past decisions are ‘locked-in’ and will burden electricity users for many years to come.

The ACCC will consider steps that can be taken to reduce complexity and improve consumers’ ability to engage with the retail electricity market and switch suppliers.

[ACCC]

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Comments

    This is what happens when stupid governments make significant changes to the market by removing Coal powered stations in both SA and VIC before a replacement is online.

    Now more than ever we need a HELE (high efficiency Low Emissions) coal plant.
    Look at Germany and Japan, huge increases in new plants.

    The great big green dream is a huge con and a huge cost that we cannot afford.

      It's not a con, but it's a ways off. There needs to be an interim solution -- that provides power, not that eases demand or prices usage out of reach -- while green power develops and is implemented.

      The whole picture would be very, very different if we were a nuclear nation, for example.

        Bring on nuclear, in the mean time, build more gas and coal power stations.
        Cheap, reliable and efficient.

          It's too late to 'bring on nuclear.' Might've helped if we'd started building in the seventies, but if we wanted new nuclear and started the process tonight, it would be 10-15 years before it started generating and closer to 30 before we get energy payback on construction. The energy system needs to transition way sooner than that.

      "when stupid governments make significant changes to the market by removing Coal powered stations in both SA and VIC"
      Note: - both are Privately owned....

      "Now more than ever we need a HELE (high efficiency Low Emissions) coal plant.
      Look at Germany and Japan, huge increases in new plants"
      You've been watching to much propaganda - HELE doesn't exist

      "The great big green dream is a huge con and a huge cost that we cannot afford."
      It's not a con - and we can afford it - like it's cheaper than coal fired power....

      Last edited 16/10/17 10:53 am

      Christian,

      The power plants were/are owned by private enterprise, and they have closed/will close because they are too expensive to maintain/upgrade. These plants were built after WW2 and had a defined lifespan.

      Energy companies were called in by Malcolm Turnbull a few weeks back and they all said that coal was no longer an economically viable energy solution. The only person that is saying build more coal fired plants is Tony Abbott, and this would only happen if the Federal Government subsidies someone to do it. With energy prices the way they are, if it was financially viable, wouldn't ever energy company in the world be jumping to build these plants?

      High efficiency low emissions plants seem to be something that miners have discovered themselves - the power industry themselves say that it isn't a reality, and that burying the emissions in holding cells below the ground are not a long term solution, it is just dumping the rubbish so no one can see it, and potentially destroying artesian water quality.

      I don't understand how you think that we can't afford cleaner energy - theres only one planet, and if China is cleaning its act up and actively investing in alternative energy sources, then why are we lagging behind?

      Energy is energy and it should be an equal playing field. Government policies that limit the growth of alternative energy in favour of more traditional energy sources are stupid. If i want to disconnect from the grid and have my own solar panels and batteries, then let me.

      It is ironic to see Liberal party members, the ones that believe that markets should decide what businesses/industries survive and what doesn't, try and argue that big electricity has got it wrong and that coal is still a viable option and lets build a new plant in North Queensland.

      Lets let the market decide and the government stay out of its way.

        if China is cleaning its act up and actively investing in alternative energy sources, then why are we lagging behind?

        Yes, China is shutting down old coal plants and they are also building newer ones in their place. Because they know without cheap power they have no manufacturing and jobs, imagine the lights didn't turn on because the government failed to invest or failed to create an environment where private investment wasn't building new plants.

        How many is Australia building? zero

          China is also investing billions in Renewable energy. But hey, Dont let that fact get in the way.

            so is Australia, whats your point?

            Why can't we just do both?

      @Christian: Congratulations on not reading the article, or understanding what the ACCC's report at all.

      Neither the state or federal governments have closed any power stations. All the power stations that have closed are owned by private companies, who have made the business decision to close, because the plants are very old and too expensive to maintain/repair.

      If a HELE coal plant is to be built, it would need to have a very solid business case to get finance, and be significantly cheaper to build and run than the renewable alternatives that are now very affordable.

      A clean coal plant is simply burning BLACK not BROWN coal (black coal burns better and thus is more efficient and cleaner)… there’s no ultramodern super doper technology.

      PRIVATE business, not the government own the coal plants (government sold off these assets decades ago) and they are closing due to costs/profit margins. Gas has a better PROFIT margin hence private business moving from COAL to GAS, there’s nothing green about it (profit drives business)

      Whole electric market is in a period (worldwide) of change, infrastructure is a 20-30 investment… with the rate of change its HIGHLY likely houses will move from net consumers to net producers of power within that period hence getting investment for a 200-1000 million plant is a hard sell (again it’s about profit)

      Look at Germany and Japan, huge increases in new plants.Who's been telling you that? Completely false.

      E.g. here's all Germany's planned power plants, for 2015 (7 coal plants) and 2017 (3 coal plants). Of the original 7, 2 were completed, 2 have been cancelled, and the remaining 3 have no expected completion date i.e. they've been shelved. Zero new coal plants have been planned, HELE or otherwise.

        Christian spends too much time reading andrew bolt and not enough time reading factual information.

      christian. it wasnt the governments that closed down the coal fired power stations it was the private companies that own them. get ur facts right before u blab on.

    This is what happens when you let corporations run what should be public assets. Re-regulate and pull them back into line.

    As opposed to which other industry sector the ACCC (as competition regulator) has effectively ruined:
    - Food
    - Booze
    - Petrol
    - Flights
    - Gas (same industry - even more fubar given Australia has massive gas fields yet we pay more for our own that what we sell it for OS)

    The ACCC could do everyone a favour by announcing "there is no such things as competition in Australia thanks to us" and then closing their doors...

      Your username suggests your comment is meant ironically.

        Don't read anything into a username - I mean who likes dell these days???

        PS - I'm proud to be a bonehead

          I don't suppose you have any evidence for your claims that the ACCC "ruined" those markets?

          I mean, the ACCC doesn't even get involved in gas or the energy market - that's the job of the AER. The problem with high domestic gas prices is because exporters locked themselves into long-term contracts before gas prices crashed internationally, so they're reluctant to sell locally for less - nothing at all to do with competition regulations.

            the acccc is a pretty useless organisation. sims spent his life and built his career advising govs on privatisation. now he says he was wrong. cant we sue him for the dumb advice he gas given and the losses he has caused us all. he should just piss off.

            The ACCC was front and centre when Coles and Woolies went on a shopper docket spree and effectively wiped out independent fuel outlets. Nothing to do with the AER.

            Competition in Australia is a thinly veiled con. Australia doesn't have the population to promote real competition and instead we tend to have duopolies that dominate. On top of that we have respective governments who are enamoured with slick talking lobbyists who have made a mockery of democracy in this country. Your and my vote doesn't count for $hit.

            Now onto gas... Exporters (most of them owned by OS interests) knew exactly what they were doing when signing these "deals". It's called "maximising shareholder return". That's the only language these energy heavyweights know and the problem with Australia is that most of their major shareholders are off shore and salivate at the prospects of Australian's paying more.

              Oh, so you're saying the ACCC didn't do enough to prevent anti-competitive behaviour? Because in some specific cases I might agree with that.

              But that's a pretty far cry from "ruining" an industry sector themselves - usually it's the monopolist companies that do that part, despite the ACCC's efforts (such as they are). Seems to me you should be blaming the companies and encouraging the ACCC to further action.

    June next year... gives the players heaps of time to "collude" and prepare a response...

    Politicians have a lot to answer for they are responsible for privatisation and de-regulation of the whole industry and it was sold to us as a means to lower prices and bring competition.... 63% above inflation, and a 3 big companies rule the market and obfuscate the pricing between complex schemes.

      too right dirtyshado. privatisation is the cause.

    So in a country with an abundance of resources we, one, don't have enough to supply our own needs and, two, allow foreign companies to sell billions of cubic metres of our gas yet return minimal or no tax dollars to the country.

    So much for Abbott's promise that repealing the carbon tax would result in significantly lower electricity prices for all (but in fact it only really benefited mining industry and carbon intensive corporations.)

    Yep, we have the government we deserve :-(

    The biggest issue I see if the changes to exporting natural resources... we used to just export surplus production, now we are fulfilling international demand above national demand. Just "dig up some more gas" is the most ignorant thing I heard out of the governments mouth over this, we already have enough gas.

      No, the most stupid thing this government has said is that it could attempt to stop GST payments to states like NSW and Victoria that have moved to ban/limit CSG exploration and mining.

      The whole shortage of gas is a market ruse - we have plenty of gas, it is just that they are selling it overseas, but these contracts have been announced and priced into these companies stock prices. Stock Prices rise when you announce that you have found the next big field, and if state governments are stopping exploration, they are capping these companies growth opportunities.

      The whole gas price is a false flag - these companies increase the price of domestic gas in the hopes that the federal government will pressure state governments to overturn regulation and they can get back to pushing chemicals into bore water and poisoning regional towns that rely on that water to survive.

        I can see no reason why states that choose to bear the burden of gas and minerals extraction should subsidise those who don't.

        As for the high price of power, this is caused by state governments selling off their assets to private companies, who screw the consumer for everything they can; or here in Qld, the state government screwing the consumer for everything they can. The renewables nonsense doesn't help either. Since the grid must be maintained, back-up power provided, and inflated prices paid to renewables generators, the non-renewable-generating consumer gets doubly screwed here too.

        Of course, this is not to let the gas companies off the hook. They persuaded the Qld government of the day to subsidise gas on the grounds that it was greener. They then pushed through a ban on gasifying coal underground so they'd have no competition, got authority to sell their gas overseas, and now they claim they are subsidising us! The solution was worked out a century ago, a state-owned grid fuelled by nice dirty coal.

        However some people take global warming seriously. Being easy to get on with, I'm happy to compromise by generating all our electricity with nukes. After all, I don't really care whether my electricity comes from coal, oil, gas, uranium, or demons on treadmills. I just insist that the trains run on time------oops, that when I push the switch, the light comes on. This condition is why I don't have any time for expensive unreliables like wind or solar.

    Sort of related... can someone explain how everything is above Inflation and Consumer Price Index?

    I thought measuring that stuff is a measure of the econony, but why the hell is CPI so far off when essentials keep going highercand the CPI isnt reflecting it. Energy price has gone so high its reflected in manufacturing and foid prices... the measure hardly budges. I think CPI is broken, its got to be a median of consumer spending? whatgoids and services are so cheap to lower than CPI to offset a 63% price rise in a multi billion dollar price rise in power

      This should help.

      http://www.abs.gov.au/ausstats/[email protected]/Lookup/6440.0Appendix102011

      As it says, CPI is an AVERAGE of price changes over time across a large number of products & services. Basically, while the price of a few things is going up by a lot, a lot of other things are going down by a little. Pretty much, retail across the board is going backwards while utilities and healthcare costs are rising massively.

        roundtable. then why has tobacco and tobacco products onlu been accredited a 1 % rise when the rise has been closer to 30% over the last year. my point is dirtyshado's point. the cpi is dodgey and rigged.

    This just in! Big Energy Companies find ways to get around regulations to keep making massive profits, SHOCKING!

    Both sides of politics are to blame for this. If you're running a power company and need to build a new power plant, it's a MASSIVE amount of money you're investing, and it will take decades for you to make that money back.

    But you can't count on one side staying in power for that time. The failure of both sides of politics to sit down and hammer out some kind of sensible compromise that they can both agree to stick to means that there's no way to make that kind of long term investment. Do we have a carbon tax or don't we? If so how much is it going to be? Will there be an emissions trading scheme? If so how will it work? Do we have a clean energy target? If so what is it?

    These are the kinds of questions that answers are needed for the next 20 - 30 years, but right now there are no answers beyond the next election, thus we don't have enough new generation being built to replace the old plants as they retire because nobody is willing to invest that kind of money only to get wrong footed by the next government.

    if u voted liberal or national you voted for what u r getting and should shut up and know better next time.

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