ACCC opposes AGL’s proposed acquisition of Macquarie Generation

The Australian Competition and Consumer Commission (ACCC) has announced it will block the acquisition of the assets of Macquarie Generation by AGL Energy Limited.

The consumer watchdog said the proposed acquisition is likely to result in a substantial lessening of competition in the market for the retail supply of electricity in New South Wales.

The key assets of Macquarie Generation are the Bayswater and Liddell power stations, together accounting for 27 per cent of NSW capacity. AGL is already a substantial electricity retailer in NSW.

ACCC chairman Rod Sims said the proposed acquisition would result in the largest source of generation capacity in NSW being owned by one of the three largest retailers in NSW.

“This is likely to raise barriers to entry and expansion for other electricity retailers in NSW and therefore reduce competition compared to the situation if the proposed acquisition does not proceed,” he said.

The ACCC formed the view the proposed acquisition would be likely to result in a significant reduction both in hedge market liquidity and the supply of competitively priced and appropriately customised hedge contracts to second tier retailers competing in NSW.

“In particular, it does not appear likely the remaining non-aligned generators in NSW, Delta Coast and Snowy Hydro, would be able to provide a sufficient quantity and type of hedge cover to be able to adequately service the requirements of second tier retailers that sought to either enter the NSW retail market or grow their existing retail position,” Mr Sims said.

The ACCC concluded the draft undertaking offered by AGL on February 17, 2014 was not capable of addressing the commission’s competition concerns in relation to the likely effect of the proposed acquisition on competition in the market for the retail supply of electricity in NSW.

Most of the market feedback received by the ACCC in relation to the undertaking raised concerns about its ability to address the likely competitive harm, as well as circumvention risks.

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