PRIME Minister Malcolm Turnbull says the Australian Competition and Consumer Commission’s (ACCC) new review of retail electricity prices will assess markets that don’t appear to be operating as effectively as they could be.
Mr Turnbull announced the consumer watchdog’s inquiry this week along with Treasurer Scott Morrison which will have until June 30 next year to make a final report but is expected to produce a preliminary paper within six months.
The process is likely to produce farm-specific data and analysis, given the Coalition government’s pledge to make agriculture a core pillar of the national economy, and the farm sector’s warnings about the damaging impacts of escalating power-costs on the viability of food and fibre producers and the urgent need for reforms to deliver a reliable and secure supply of affordable energy.
Mr Turnbull said electricity prices for Australian households had doubled during the six years of the Labor government but came down with the abolition of the carbon tax following the Coalition’s election in 2013 where the legislation was repealed.
But he said “we are now seeing further upward pressure on electricity prices”.
“There have been a number of reports, notably by the Grattan Institute, which have indicated that excessive profit margins (are) being made by retailers in the electricity market,” he said.
“We need to get to the bottom of this.
“We need to get to the bottom of this in a way that protects Australian families and Australian businesses - electricity is absolutely an essential service.
“So, we are tasking the consumer watchdog, the ACCC to investigate this thoroughly.”
Mr Morrison said the inquiry would provide better information on what was actually driving electricity prices and the ACCC had the powers and skills necessary to “go to the heart of these questions”.
“This is the first such inquiry that the ACCC has actually undertaken into these measures,” he said.
“It will prize open the books….of the electricity retailers.
“Beyond that it will look at existing cost structures and margins.
“It will review these against the contracts offered to consumers and businesses.”
Mr Turnbull said the electricity market was evolving and changing “very rapidly” as it was disrupted by technology.
He said generation was becoming more distributed and more variable and demand was also becoming more variable.
“Again, that is being driven in part by technology, because of so much solar, so much rooftop solar - whether it is small scale or large scale,” he said.
“All of that requires a response - there are elements of the national electricity market that are plainly not working adequately.
“A very obvious area of neglect has been the failure to plan for the storage that is required and the backup that is required to support variable sources of energy - wind and solar most notably.”
But Shadow Energy Minister Mark Butler said Labor has been calling for the ACCC to investigate electricity prices for a long time and welcomed the belated announcement but it was “not enough”.
“After four years in government - and wholesale electricity prices more than doubling during that period - this is really the best the Liberals can come up with?” he said.
“Under Malcolm Turnbull, the energy crisis is getting worse and Australians are paying the price.
“Power prices are up, pollution is up, and jobs are down.
“Australians know this investigation alone will not solve the nation’s immediate energy crisis.
“A new ACCC inquiry is a welcome drop in an otherwise empty bucket.”
But ACCC Chair Rod Sims said electricity prices had nearly doubled on top of inflation in most parts of Australia over the last decade based on a variety of different factors.
Mr Sims said it would be important to understand and examine these different factors in each state and territory, as part of the new inquiry.
“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,” he said.
“We enter this inquiry with an open mind and look forward to developing recommendations which can make a difference for Australian households and businesses.”
In welcoming the new ACCC investigation, National Farmers’ Federation President Fiona Simson said farmers across the nation had endured skyrocketing electricity tariffs for many years now and the “frightening upward trajectory had to stop”.
Ms Simson said customers should not be paying the price for wasteful, over investment in the past – nor should they be lining the pockets of asset owners through inflated profit margins.
“This inquiry is an important opportunity to shine a truly independent light - that takes a consumers’ perspective - on the way power prices are established,” she said.