Federal Government Announces Review into Retail Electricity Prices

Friday 31 March 2017 @ 10.02 a.m. | Legal Research | Trade & Commerce

The Federal Government has directed the Australian Competition and Consumer Commission (ACCC) to immediately commence an inquiry into retail electricity pricing amid a spike in power costs for consumers on Australia's east coast.

The ACCC will be given the power to demand information from electricity providers to get an in-depth look into what is going on in the market and to see if further intervention is needed.

Background to the Request

The direction will be made under s 95H(1) of the Competition and Consumer Act 2010 (Cth) (the Act), which provides the Commission the power to demand information. This will enable the ACCC to find out what is going on in the market and whether there is a case for further intervention or use of the ACCC’s broader enforcement powers.

The ACCC will distribute an Issues Paper on matters relevant to the inquiry, and will be calling for public submissions, intending to conduct public and private hearings.

The ACCC’s current involvement in the retail electricity sector and related industries largely relate to ensuring compliance with the provisions of the Act prohibiting anti-competitive practices and unfair practices (such as misleading and deceptive conduct and false and misleading representations).

Terms of Reference for the Review

The review will also look into transparency and clarity of energy company contracts with consumers, and check if there has been any anti-competitive behaviour or collusion.

The terms of reference provided to the ACCC will direct them to consider:

  • 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; and
  • the profitability of electricity retailers and whether these profits are commensurate.

The Government has said retail electricity markets do not appear to be operating as effectively as they could. In a joint statement, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison were quoted as saying:

"… A better deal in electricity is vital to keeping the lights on, delivering cheaper prices to families and businesses and sustaining jobs, particularly the thousands of jobs in our energy intensive industries …"

Comment from the ACCC

Commenting on the review, ACCC Chairman Rod Sims said:

“Electricity prices have nearly doubled on top of inflation in most parts of Australia over the last decade based on a variety of different factors. It will be important to understand and examine these different factors in each state and territory. The ACCC is also keen to look at the structure of the retail industry, the nature of competition, the representation of prices to consumers and other factors influencing the price paid by Australians for electricity. We enter this inquiry with an open mind and look forward to developing recommendations which can make a difference for Australian households and businesses.”

In undertaking this work, the ACCC will work with energy agencies such as the Australian Energy Regulator and the Australian Energy Markets Commission.

The ACCC is expected to produce a preliminary report by the end of September 2017, with a final report due on 30 June 2018.

Other Current ACCC Investigations

The ACCC is currently undertaking a dairy industry, and in 2015 undertook the East Coast Gas Inquiry at the direction of the Government, and has recently completed a market study into cattle and beef markets, and studies into the new car retailing industry and the communications sector are underway. The ACCC has also previously taken action against energy retailers for illegal door-to-door selling practices.

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Sources:

ACCC To Review Electricity Prices – Prime Minister and Treasurer, Media Release

Federal Government announces review into retail electricity prices - abc.net.au

ACCC given powers to investigate and report on retail electricity prices – ACCC Media Release MR 39/17

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