The ACCC has released its latest Electricity Markets Inquiry report, including an update to reflect current market conditions that shows electricity price rises have been significant and unprecedented in recent weeks.
During the first two weeks of June, wholesale electricity spot prices rose significantly. Volume weighted average spot prices ranged from $341/MWh to $590/MWh depending on region, roughly five times higher than in Q1, 2022. Base futures contracts also became significantly more expensive, reflecting market expectations of a sustained period of high wholesale prices.
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“There is no doubt that international factors such as the war in Ukraine have heavily impacted the global gas supply and prices. A cold start to winter and a reliance on ageing coal-fired power stations amplified challenges already facing the Australian energy market,” ACCC chair Gina Cass-Gottlieb said.
“We are acutely aware of the pressures that rapidly rising energy prices are placing on Australian households and businesses. We are working closely with our colleagues at the Australian Energy Regulator to monitor the market and to take action against conduct harming competition or consumers and to preserve the competitiveness of our energy markets.”
In response to these building challenges, the Australian Energy Market Operator (AEMO) suspended operation of the National Electricity Market last week. This provided the market operator the best avenue in the circumstances to ensure secure and reliable supply of electricity.
The Treasurer recently wrote to the ACCC about its role in addressing the energy crisis.
“Under direction from the federal government, we will use our full information gathering powers to provide greater transparency around the factors influencing electricity and gas prices, including profits and margins from a wide range of energy companies,” Cass-Gottlieb said.
“In line with the Treasurer’s request, we will also assess and bring to the government’s attention any need for regulatory change to ensure electricity and gas markets function properly for the benefit of all Australian consumers.
“In addition, the Federal Energy Minister with State and Territory Energy Ministers have requested the ACCC, as part of its ongoing inquiries on the national energy market, to report back in July 2022 on the current market dynamics,” Cass-Gottlieb said.
The ACCC actively monitors retailer offers to supply electricity and can take energy retailers to court if they mislead consumers.
“Working jointly with the AER, we have written to energy retailers to remind them of their obligations in relation to electricity prices under the Competition and Consumer Act and the National Electricity Retail Code,” Cass-Gottlieb said.
Retailers cannot set the price of their standing offers above the ‘safety net’ Default Market Offer set by the AER, or (in Victoria) the Victorian Default Offer set by the Essential Services Commission.
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The ACCC also enforces legislation aimed at preventing anti-competitive conduct in the electricity market. Part XICA of the Competition and Consumer Act (the Prohibiting Energy Market Misconduct laws) bans generators from manipulating the spot market, for example by withholding supply to inflate prices. It also penalises generators that withhold electricity contracts for the purpose of substantially lessening market competition. We will be closely watching market behaviour in coming months to ensure these rules are not being broken.
The report and addendum are available on the ACCC’s website at Electricity market monitoring 2018-2025.