The Australian Competition and Consumer Commission has agreed in-principle not intervene in the acquisition of Edison Mission Energy by International Power after agreeing in-principle to court-enforceable undertakings, ACCC Chairman, Mr Graeme Samuel, said today.
"The final decision not to intervene will depend on acceptance by the ACCC of the final form of the undertakings.
"The ACCC was concerned that the acquisition would give International Power the ability to exercise market power in the Victorian region of the National Electricity Market, which would be likely to lead to electricity prices higher than warranted by normal supply and demand factors", he said. "Significantly, the proposed acquisition involves two of the four coal fired base load electricity generators located in Victoria.
"In response to the ACCC's competition concerns, International Power offered undertakings intended to alleviate these concerns.
"Whilst an in-principle agreement has been reached, the undertakings have not been finalised. Negotiations are continuing on the terms and conditions for the divestiture of Valley Power, a 300MW gas fired electricity generator that is currently 60 per cent owned by Edison Mission.
"An important factor in the ACCC's assessment of the increased horizontal concentration is the existence of the long term, fixed price SECV contract that Loy Yang B has with the Portland aluminium smelter.
"It is intended that the final form of the undertakings will ensure that the acquisition of Edison Mission's Australian assets will not give International Power the enhanced ability to raise wholesale electricity prices above competitive levels".
Previously the ACCC has stated that it will closely consider the competition effects of any proposed aggregation of electricity generators in the NEM, especially if the generators involved are located in the same region. The ACCC remains firmly committed to this principle. The ACCC decided not to intervene in this matter only after it was completely satisfied that the undertaking would address the competition concerns raised by the acquisition.
The reasons for the decision will be posted on the ACCC website shortly.