Electricity generation assets will be the Australian Competition and Consumer Commission’s focus when the privatisation of Queensland electricity assets is triggered.
In a speech to the Energy Users’ Association of Australia, ACCC Chairman Rod Sims said the Queensland generation sector is one of the most highly concentrated in Australia.
“The ACCC hopes that the Queensland government will use this opportunity to establish a competitive structure when privatising its generation assets.”
“Breaking up Stanwell and CS Energy prior to privatisation into, say, three competitors, as existed a short time ago, would clearly improve competitive outcomes and make ACCC approval a smoother path, as it would allow a competitive generation market.”
Mr Sims said good economic outcomes can be achieved when governments take a long term view of the benefits of privatisation; that is, by focussing on economic efficiency.
“On the flip side, there is the potential that selling an asset may worsen or entrench a market structure that is not sufficiently competitive, and so damage competition, consumers and the long-term health of the economy.”
Mr Sims also called on energy industry participants to put forward their views during merger review processes.
“Without industry participants who are willing to give detailed evidence the decision-making process will not see the right results.”
“If you have concerns with an acquisition in the future, I would encourage you to approach the ACCC, not only to provide your views but, if the matter is going before the Tribunal, also to make an offer to provide detailed admissible evidence to support your views.”
He also provided an update on how electricity, natural gas and synthetic greenhouse gas businesses have responded to their carbon tax repeal obligations.
“Compliance with the substantiation requirements has been high; we even received more substantiation statements than expected.”
“This shows that businesses supplying regulated goods are taking the ACCC’s role and powers seriously, and are conscious of doing the right thing.”
Mr Sims said the ACCC’s carbon motto is: what went on should now come off.
“If a business, any business, passed through a carbon component in its prices during the carbon tax period, then the ACCC expects it to now pass back the cost savings from the repeal.”
Separately, in discussing concerns about rapid changes in the gas market, Mr Sims said a ‘quick fix’ that distorts the competitive operation of gas markets should be avoided.
“Forms of gas reservation, for example, distort market signals, and the development of new gas supply.
“Rather, efforts should be directed towards addressing any inefficiencies in our gas market so that competition can deliver better outcomes for gas users,” Mr Sims said.
See also: Carbon, mergers and other issues