The inquiry is about the competitiveness of retail electricity prices in the National Electricity Market.
"The ACCC is also keen to look at the structure of the retail industry, the nature of competition, the representation of prices to consumers and other factors influencing the price paid by Australians for electricity", ACCC Chairman Rod Sims said.
Although the focus of the inquiry is on retail electricity markets, to properly undertake the inquiry, requires analysing wholesale electricity market conduct, electricity networks and the role played by electricity hedging contracts. For example, the ACCC is likely to investigate whether the wholesale market has become riskier due to price volatility, because if it is riskier then higher returns would be justified. Similarly, any investigation into retail prices cannot be isolated from the role that network prices play in determining those prices.
The terms of reference direct the ACCC to consider the following matters in its inquiry:
We anticipate a key focus of ACCC scrutiny will be the vertical integration and the effects of the 'Gentailer' model where electricity generators are vertically integrated with electricity retailers.
The inquiry will be held under Part VIIA of the Competition and Consumer Act (2010). This provides the ACCC with the power to demand information and hold hearings to assess the level of competition in the market.
Based on our experience assisting clients with previous inquiries arising from Part VIIA of the Act, we expect this inquiry will involve the following steps:
Until now, the ACCC's involvement in the retail electricity sector has largely focused on ensuring compliance with the provisions of the Act which prohibit anti-competitive practices and unfair practices (such as misleading and deceptive conduct) as well as considering various corporate acquisitions in the sector.
Now the ACCC has been given the power to investigate, demand information, and report on electricity supply and prices. The inquiry is likely to provide another opportunity to air many of the issues and concerns raised in relation to the price and reliability of electricity supply, although the focus of the inquiry will be on the retail end of the market, rather than the future of generation and the electricity networks.
Mr Sims indicated that the ACCC is likely to rely on its compulsory information gathering powers. "There has been a number of issues raised on the electricity market which you just can't get to the bottom of without our information gathering powers, so we'll be using them quite a lot", he said.
For any questions or concerns regarding the ACCC inquiry, please contact us.