‘Uncompetitive electricity market damaging business

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Large energy users have called for a change to the structure of the South Australian electricity market, claiming rising electricity costs are threatening residents’ wellbeing.

Energy Users Association of Australia (EUAA) chief executive officer Phil Barresi said wholesale electricity prices are being unnecessarily inflated by the bidding behaviour of major power generators as a result of the lack of competition in the market – which is threatening jobs important to the
local economy.

“This is occurring despite the Australian Electricity Market Operator (AEMO) latest market outlook indicating adequate generating capacity in the electricity system in South Australia,” he said.

“Oversupply conditions in New South Wales and Victoria has meant lower wholesale prices for generators in those states, with a lower cost of doing
business as a result. South Australia needs better competitive behaviours from its electricity market in order to avoid ongoing increased costs for business and for householders.”

A key difference between South Australia’s power market and that of New South Wales and Victoria is a high concentration of market power in the hands of a small number of power generating companies. According to the EUAA, this will be exacerbated by the pending closure of the large base load Northern Power Station near Port Augusta, thus removing Alinta Energy from the market and further entrenching market power of fewer generating companies.

“AGL is the most influential power generator in the South Australian system due to its control of output from multiple generating assets, including the state’s largest power station, Torrens Island,’ Mr Barresi said.

“The South Australian electricity market is subject to risk of not working properly when there is inadequate competition to maintain competitive bids from generators in their sale of electricity.”

Wholesale power prices in the state this financial year averaged almost $30/MWh higher than Victoria ($66/MWh versus $36/MWh on the National Electricity Market). Similar price differences also currently exist on the forward trading market for electricity for the full 2015/16 financial year.

Mr Barresi said the annualised effect of such a difference is around $360 million of additional costs on South Australian energy consumers, based on AEMO forecasts of approximately 12,000,000MW of grid electricity demand in the coming year.

“In the absence of a change to the opportunistic bidding practices of the dominant market players, a change is needed to the market structure,” he said.

“The current structure allows uncompetitive bidding to arise and hurt both industry and domestic consumers. These behaviours add costs for the public, and will ultimately contribute to reducing people’s standard of living when jobs leave the state.”