Mergers of major electricity generators would be capped and the energy regulator given more power to combat market manipulation under sweeping reforms to reduce rising energy prices released by the consumer watchdog Wednesday.
The 56 measures proposed in the Australian Competition and Consumer Commission’s final retail electricity pricing report address concentration in the wholesale and retail electricity markets and “poorly designed” policy and regulation that have led to the high costs of power bills, ACCC chair Rod Sims said in announcing the recommendations.
“The National Electricity Market is largely broken and needs to be reset. Previous approaches to policy, regulatory design and competition in this sector over at least the past decade have resulted in a serious electricity affordability problem for consumers and businesses,” Sims said.
The ACCC said the proposed reforms would lead to reductions in household electricity bills of up to 25 percent. Small and medium businesses would also save, seeing their bills drop by up to 24 percent on their bills, while commercial customers would be looking at deductions up to 26 percent.
Under the ACCC’s recommendations, companies with 20 per cent or more market share would be banned from obtaining more generation capacity.
The Australian Energy Regulator would be given added powers to investigate and address problems in the market, and penalties would be increased. The ACCC also wants retail ‘standing’ offers to be abolished and replaced with a new ‘default’ offer set by the AER.
Other measures include rebates or voluntary write downs for over investment, a solar feed-in-tariff scheme to be funded by state governments, and a restructuring of Queensland generators into three separately owned portfolios to boost competition.
Electricity generation startups should also be given more government support to drive competition in the industry under the measures.
“While important steps have been taken recently, restoring electricity affordability will require wide ranging and comprehensive action. We believe our changes can and will, if adopted, have a powerful and tangible impact on electricity affordability for all Australians; this will reduce economic inequality and enhance our national welfare,” Sims said.
Federal energy minister Josh Frydenberg told ABC Radio Wednesday the government would carefully consider the recommendations and consult closely with the states.
“The clear message is that the market is not working in the best interests of consumers,” Frydenberg said. “This is the most comprehensive report from our key competition watchdog.”
Moving customers off the current range of ‘standing’ offers to a new ‘default’ offer was one of the most important recommended measures, Sims said. The move would result in savings of $500 to $750 per year for residential consumers.
“It is clear that most households are paying far too much for electricity. In addition, some of the most vulnerable in our community are forced to struggle through freezing winters and scorching summers, with many others also having difficulty paying their bills,” Sims said.
The ACCC’s “blueprint” for reducing electricity bills is the culmination of a public inquiry that began in March last year to identify the causes of soaring prices. The watchdog issued over 100 notices to retail and wholesale providers to produce information that included revenue, usage, costs and margins.
The ACCC received more than 200 submissions from industry players as part of the inquiry.
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