Western Australia’s Economic Regulation Authority (ERA) and state-owned utility Synergy have agreed to a $30 million settlement in relation to Synergy’s bidding behaviour in the wholesale market.
In 2019 the ERA filed an application with the Electricity Review Board alleging that Synergy had breached the Wholesale Electricity Market Rules by pricing its electricity in the balancing market above its reasonable expectation of short run marginal costs and that this behaviour related to market power.
Related article: Regulator fines energy retailer CovaU over standing offers
The ERA alleged that this increased the price of electricity in the wholesale balancing market. The investigation period covered April 2016 to July 2017.
The Electricity Review Board’s decision in November 2022 held that Synergy engaged in the contravening conduct alleged by the ERA and made directions for a further hearing on the penalty for the contravening conduct.
Under the settlement agreement, Synergy will pay the sum of $30 million which will be distributed to eligible non-contestable residential customers. This means households will receive a direct credit of approximately $28 off their Synergy electricity bill. These credits will be made over the next four months as part of the normal billing process.
Synergy will also undertake an independent review of the internal circumstances around the contravening conduct including its market bidding behaviour.
ERA chair Steve Edwell said the regulatory authority welcomed the outcome, which brought an end the long period of litigation.
“Synergy will pay $30 million and has publicly acknowledged its contravention of the Market Rules.
“The learning here is that electricity generators must ensure that the costs underpinning their wholesale market prices are consistent with the Market Rules. This is especially the case for generators who have market power.”
Edwell said Market Rules compliance risks should be a feature of governance processes and boards of electricity generation businesses should establish and document methodologies for pricing their generation offers and hold management accountable for implementation.
Related article: EnergyAustralia and Incitec fined for alleged gas breaches
He said the ERA sought that the $30 million be paid directly to Synergy’s eligible
residential customers rather than back to the wholesale market participants.
“This will provide some relief to current cost of living pressures,” he said.
