July 11, 2018 - The resources sector has welcomed recommendations from the Australian Competition and Consumer Commission (ACCC) to significantly improve electricity affordability for Australian consumers and businesses.
The ACCC in March launched an inquiry to identify the root causes of the high electricity prices across the electricity supply chain.
“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,” ACCC chairperson Rod Sims said.
“There are many reasons Australia has the electricity affordability issues we are now facing. Wholesale and retail markets are too concentrated. Regulation and poorly designed policy have added significant costs to electricity bills. Retailers’ marketing of discounts are inconsistent and confusing to consumers and have left many consumers on excessively high ‘standing’ offers.”
In its final report, the ACCC inquiry estimates its recommendations, if adopted, will save the average household between 20% and 25% on their electricity bill, or around A$290 to A$415a year, while commercial and industrial customers, the heaviest users, could see electricity costs decrease on average by 26%.
“Commercial and industrial customers, like mining and manufacturing companies, have watched what has been a relative competitive advantage to them, affordable electricity, now threatening their viability,” Sims said.
“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.”
The ACCC’s recommendations included limiting companies with 20% or more market share from acquiring more generation capacity, increasing the transparency of over-the-counter contract trading, improving the Australian Energy Regulator’s power to investigate and address problems in the market, the voluntary writedown of network overinvestment, and a premium solar feed-in tariff scheme that should be funded by the government.
The Minerals Council of Australia (MCA) on Wednesday said that the recommendation that the government underwrite long-term energy contracts to secure private investment in new low-cost power generation capable of meeting the needs of Australian industry is a welcome reality check.
“A diverse energy mix will achieve lowest-cost, reliable, low-emissions, sustainable energy for Australia,” MCA CEO Tania Constable said.
“The ACCC has recognized the impact on wholesale energy prices arising from the closure of older and larger generation assets and has recommended a role for government in underwriting longer-term contracts for large commercial and industrial users.
“Secure power supply agreements would enhance the opportunity for private sector financing of a new coal or gas plant in Australia capable of delivering least-cost power 24/7.”
Constable noted that securing new low-cost baseload power generation to lower costs, improve reliability and encourage new technology, to help Australia meet its emissions reduction targets, is essential for Australia’s future.
The Queensland Resources Council has also welcomed the recommendations, with CEO Ian Macfarlane saying energy costs were one of the biggest inputs for the resources sector.
“The resources sector relies on stable and affordable power to support a range of jobs, including at mine sites and in associated industries such as processing and refining,” Macfarlane said.
“We must continue to make the most of our natural resources, and Queensland can continue to lead the country with the addition of new advanced, baseload power for the national electricity market. This will support jobs and investments across the East Coast, especially with the addition of a stronger interconnector with New South Wales.
“We call on both the state and federal governments to support a full range of energy sources and technologies to add the extra baseload power into the national grid to support resources jobs and industries.”
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