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July 1, 2022

Energy sector lacks competition: watchdog

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A huge increase in electricity prices over the past decade is putting unacceptable pressure on Australian households and businesses, the consumer watchdog has declared.

The Australian Competition and Consumer Commission has delivered its preliminary report examining retail electricity prices to the Turnbull government, providing yet more evidence of the woes besetting the energy sector.

But ACCC boss Rod Sims says the government will have to work out if its focus is on lowering prices, boosting reliability or reducing emissions because the problems don’t necessarily have the same solution.

Residential prices increased 63 per cent since 2007 and the average bill was about $1524 plus GST.

The ACCC found many households could not absorb these increases, with some people forced to cut spending on food and health to cover their power bills.

Similarly, businesses that couldn’t pass on higher costs told the watchdog they were considering cutting staff or moving overseas and some have closed.

Mr Sims said there was almost a penalty for loyalty with the major energy retailers.

“If you haven’t phoned your energy retailer in a couple of years, phone them up, demand a better deal and threaten to switch – I’d be surprised if you don’t save a lot of money,” he told Sky News.

The main driver behind higher prices was network costs – the poles and wires – with retailer costs and green schemes contributing to a lesser extent.

The government is finalising its energy policy, including whether to adopt a version of the clean energy target recommended by Chief Scientists Alan Finkel.

Mr Sims cautioned the clean energy target was designed to cut emissions but it was hard to say whether it would also bring down prices.

“While it may bring forward extra investment, it also involves a subsidy smeared across all electricity users, so it’s a hard one to call,” he said.

“If our focus is on meeting the Paris (emissions) targets, that’s a good thing to look at but if our focus is on affordability we should keep the focus on the network tariffs, retails costs, how to get generation prices down and so forth.”

It was important to understand the trade-offs between the various objectives if the nation was to have an effective energy policy.

Finance Minister Mathias Cormann repeatedly insisted the government was focused on bringing down prices, delivering a reliable system and meeting Australia’s emissions reduction targets.

“But we’ve always got to ensure that we don’t impose disproportionate costs on families and business when it comes to environmental objectives,” he told ABC radio.

The ACCC will make its final report to government in June 2018.


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