27 March 2017
Media Release - #2017022, 2017

ACCC to review electricity prices

Joint media release
with the Hon Malcolm Turnbull MP
Prime Minister

The Turnbull Government has directed the Australian Competition and Consumer Commission (ACCC) to review retail electricity prices.

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.

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.

The Turnbull Government is determined to ensure Australians get a better deal for their energy.

A better deal in electricity is vital to keeping the lights on, delivering cheaper prices to families and businesses and sustaining jobs, particularly the thousands of jobs in our energy intensive industries.

Recent work by a number of organisations - including the Australian Energy Market Commission, Energy Consumers Australia and the Grattan Institute - has highlighted significant concern about the causes of recent electricity price increases on the East Coast. Submissions to the COAG’s review into energy markets, chaired by Dr Alan Finkel, have highlighted similar concerns.

The ACCC’s inquiry will identify and report on the key cost components of electricity retail pricing and how they affect the retail offers made to customers. The inquiry will examine whether electricity retailers’ margins and profitability are in line with their costs and risks.

The inquiry will consider any impediments to consumer choice, such as the transparency and clarity of contracts that energy companies offer to consumers.

The inquiry will also consider the competitiven! ess of offers available to larger business customers and take into account wholesale electricity market conduct, price and cost issues where relevant.

The terms of reference provided to the ACCC will direct them to consider:

  • the key cost drivers of retail electricity pricing
  • the existence and extent of any entry barriers in retail markets
  • the impact of vertical integration
  • whether there is any behaviour preventing or limiting competition or consumer choice
  • the profitability of electricity retailers and whether these profits are commensurate with the risk retailers face
  • all wholesale market price, cost and conduct issues relevant to the inquiry.

The direction will be made under section 95H(1) of the Competition and Consumer Act 2010, which provides the Commission the power to demand information. That will make it easier to find out what's going on in the market and whether there is a case for further intervention or use of the ACCC’s broader enforcement powers.

Given its data-intensive and complex nature, the inquiry will be given until 30 June 2018 to report. The direction would, however, require the ACCC to produce a paper within six months on its preliminary insights into the strategies and pricing behaviours of key electricity retailers. The ACCC will work with other relevant agencies, such as the Australian Energy Regulator and the Australia Energy Market Commission in undertaking the inquiry.

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.

This initiative is part of the Turnbull Government’s broader strategy to maintain energy security and affordability. It builds on our other measures including investment in new energy storage infrastructure, securing domestic gas supplies, reigning in gas transportation and electricity network costs and initiating the Independent Review into the reliability and stability of the National Electricity Market being chaired by Australia’s Chief Scientist, Dr Alan Finkel AO.