Competition boss flags action to tackle big electricity profits

Australia’s competition boss has flagged further action to tackle electricity retailers gouging excessive profits from households.
Nanjing Night Net

A report from the Grattan Institute this week estimated that Victorian households would save as much as $250 million a year if the profit margin of electricity retailers was the same as for other retail businesses.

Australian Competition and Consumer Commission chairman Rod Sims said there were concerns about how electricity retailers were marketing their products.

“There may well be more action we need to take looking at enforcement options,” Mr Sims said.

He said in NSW and Queensland, where power networks remain in public ownership, there had been excessive spending on poles and wires, whereas in Victoria the privately owned networks had not overspent.

“There is a cost driver in NSW and Queensland that you wouldn’t have had in Victoria because the network costs did not go up anything like they did in NSW and Queensland,” he said.

The Grattan Institute report said competition in electricity in Victoria had failed to deliver what was promised: lower prices. It found the steep rise in prices over the past decade had not been justified, suggesting government intervention could be needed to rein in excessive profits.

The Andrews government has come under increasing political pressure over power prices and energy security, with Hazelwood power station, which supplies up to one-quarter of the state’s electricity, to close at the end of this month.

Premier Daniel Andrews, who on Tuesday chaired a new cabinet taskforce examining electricity prices and security, said it was impossible for the government to seize back control of energy pricing.

He said the energy market was not working for ordinary Victorians.

“It is favouring very large companies who are making significant profits while it does not necessarily benefit and support those who need it most,” he said. “This is after all an essential service.”

Mr Andrews said the government would do anything possible to improve transparency and make the retail energy system simpler for consumers.

The state government has also launched a review of retail pricing, with a report to be delivered in May.

Australian Energy Council chief executive Matthew Warren rejected the Grattan Institute’s report, which he said failed to reflect the commercial reality of retail electricity.

He said if retailers were making the margins discussed in the report then other major retailers would be attracted to the “rivers of gold”.

“In reality they don’t exist. In reality retail electricity remains a tough place to make a living,” he said. “Retail margins are being constantly squeezed by wholesale prices and the cost of government schemes and programs.”

He said re-regulating electricity would not lead to any major changes in prices but would flatten the range of deals for consumers.

“In a state like Victoria, customers can and do shop around to get the best deal,” he said.

In March 2015 the Federal Court ordered Origin Energy to pay $2 million in fines because of unlawful door-to-door selling practices.

And in April 2015 the court ordered AGL South Australia to pay penalties of $700,000 and to offer refunds worth $780,000 to 23,000 consumers for making false or misleading representations about the level of discount residential consumers would get under energy plans.

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