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]