The Turnbull government has opened new front in its push on energy affordability by ordering the competition watchdog to conduct a review into retail electricity prices.
Amid growing opinion that the National Electricity Market has failed consumers and re-regulation may be needed, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison will today sool the Australian Competition and Consumer Commission onto the power retailers.
The ACCC will be given until June 30, 2018 to issue a final report, which will be in the lead-up to the next federal election.
In a joint statement with his Treasurer, Mr Turnbull flagged either greater intervention, regulation or use of enforcement powers by the ACCC, depending on the findings.
Actions
"In responding to the ACCC's review, the Turnbull government will consider what further action should be taken by policy makers and regulators to ensure markets are competitive and energy consumers, both residential and business, can have confidence in the reliability, security, pricing and terms and conditions of supply."
The review will look at profits, whether there is anti-competitive conduct afoot, factors driving the retail price, and barriers discouraging consumers from receiving the benefits of competition.
"The review will scrutinise electricity retailer behaviour as well as contracts offered to residential and business customers and ensure consumers benefit from competition in the National Electricity Market," Mr Turnbull and Mr Morrison said in a joint statement.
"Competition in retail electricity markets should mean lower prices for residential and business consumers. However, retail electricity markets don't appear to be operating as effectively as they could."
In ordering the review, the government cites recent studies by such groups as the Australian Energy Market Commission, Energy Consumers Australia and the Grattan Institute which have "highlighted significant concern about the causes of recent electricity price increases on the East Coast" which is primarily serviced by AGL, Energy Australia and Origin.
Gouging
The Grattan Institute report of two weeks ago said electricity retailing had failed to deliver lower prices for consumers, and governments would need to step in and re-regulate prices if the industry did not lift its game.
"Although lower price deals are available, consumers find the market so complicated that many give up trying to find them. As a result many Australians, including some of the most vulnerable, pay more than they need to," it said.
"The way retailers advertise their discounts is confusing and possibly misleading. An advertised 30 per cent discount can end up being a discount on only a small part of the bill, not the whole bill."
Mr Turnbull said the ACCC would consider these concerns.
The announcement will most likely be opposed by the retailers. The Australia Energy Council disputed much of the Grattan Institute report, arguing there was no price gouging and the spike in wholesale prices was largely responsible for high retail prices.
"Commercial sensitivities prevent the publication (and collection!) of specifics, and this perceived opaqueness has played into the hands of commentators such as the Grattan Institute, which leads to profit margin estimates that suggest retailers are ripping off customers," the council said.
"Price increases are also a direct result of major changes in the generation of electricity in Victoria and its impact on the wholesale electricity market, rather than the level of retail competition," it argued.
