C&I users need affordable energy

ACCC Chairman Rod Sims delivered an address to the Energy Users Association of Australia’s (EUAA) 2018 National Conference today, highlighting the current state of Australia’s electricity and gas markets.

“In Australia, the matters surrounding energy are some of our defining economic challenges for the 21st century,” Mr Sims said.

“The energy market is working extremely well for energy companies, but is working badly for commercial and industrial users. It is the C&I customers who need us to find solutions; the energy companies don’t have as strong an incentive to fix the problem.”

The Chairman singled out the gas market as being of heightened concern to Commercial and Industrial (C&I) users, given the implications for employment, investment and company viability.

“If the gas market was functioning effectively, current price signals would encourage additional investment but the gas shortfall for southern states, moratoria and other regulatory restrictions are impeding the market,” Mr Sims said.

“There is insufficient gas currently forecast to be produced in south east Australia to meet the domestic demand in the south. This affects negotiations between gas suppliers and buyers in every region in the southern states and could add at least $2/GJ and possibly up to $4/GJ to the prices paid by gas consumers in the southern states.”

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“The ACCC is working to improve the gas market by addressing possible anti-competitive behaviour, as well as improvements to market transparency, such as the LNG netback price series we announced last week.”

“After consulting with a range of stakeholders earlier this year, the ACCC has decided to publish an LNG netback price series on our website as a trial measure throughout our inquiry,” Mr Sims announced.

“We will publish both a series based on measures of recent and historic Asian LNG spot prices as well as a forward indicator extending to the end of the following calendar year.”

Mr Sims also discussed Australia’s current electricity affordability crisis, which is affecting both C&I users and the community more broadly.

“For C&I customers, huge increases in electricity prices have been driven mainly by an overspend on network infrastructure (poles and wires) and environmental schemes such as premium solar feed-in tariffs. More recently wholesale cost increases have driven prices even higher as generation capacity exited the market,” Mr Sims said.

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“The ACCC is now focused on producing a report by end-June on how to improve electricity affordability for Australian businesses and consumers.”

“We will make recommendations on networks, environmental schemes, generation and retail. We will factor in and reflect on a wide range of recent proposals, such as the National Energy Guarantee and the Grattan Institute’s work on network valuations,” Mr Sims said.

The EUAA is an incorporated, not-for-profit association representing Australia’s energy users, and Commercial and Industrial users.

C&I users tend to be the largest users of gas and electricity, accounting for some 26 per cent of total electricity consumption, and 46 per cent of total gas consumption, and have been greatly affected by the recent price shock on the East Coast of Australia.

The Chairman’s speech is available at C&I users need affordable energy