ACCC proposes to grant authorisation to SA businesses for the joint purchase of electricity

13 April 2017

The Australian Competition and Consumer Commission has issued a draft determination proposing to allow the South Australian Chamber of Mines and Energy, along with 24 other South Australian businesses, to establish a joint electricity purchasing group. The ACCC proposes to grant authorisation for 11 years.

The ACCC has also granted interim authorisation to allow the parties to commence a joint tender for the supply of electricity immediately. 

The joint buying group wants to secure reliable electricity supply arrangements for its members at competitive prices. Between them the group accounts for around 15 per cent of electricity demand in South Australia.

“While the outcome of the tender process is uncertain, the proposed conduct, by offering a guaranteed reasonably sized load for up to ten years, has a real chance of changing the wholesale market dynamics, where it allows existing participants to use existing plant more efficiently, or allowing new entry of electricity generation into South Australia. This could bring the benefits of increased competition in the wholesale market for electricity,” ACCC Chairman Rod Sims said.

“Given the high levels of concentration on the supply side of the market in South Australia, the tender may provide further competition benefits by combining demand and increasing the participants’ bargaining power in the retail supply of energy contracts”, Mr Sims said.

The ACCC also considered the transaction cost savings likely to result from the tender provided a further source of public benefit.

“The ACCC considers there will be minimal public detriment from the proposed conduct, given that the group accounts for a relatively small proportion of total market demand”, Mr Sims said.

The ACCC is seeking submissions on its draft determination before making a final decision, which is expected in June.

Further information about the application for authorisation is available on the ACCC’s public register.

Background

SACOME is the peak industry body representing companies with interests in the South Australian minerals, energy, extractive, and oil and gas sectors, including those who provide services to these companies.

The 24 members of the bargaining group are Adelaide Brighton Cement Ltd, Arrium Limited, Brickworks Building Products, Central Irrigation Trust, Flinders University, Hillgrove Resources, IGA Distribution (SA) Pty Ltd, Impeach Pty Ltd, Intercast & Forge Pty Ltd, Mardina Pty Ltd, Nyrstar Port Pirie Ltd, OZ Minerals Limited, Orora Limited, Pernod Ricard Winemakers Pty Ltd, Rex Minerals (SA) Pty Ltd, SMR Automotive, Seeley International, Shahin Brothers Pty Ltd, Shahin Enterprises Pty Ltd, Shahin Holdings Pty Ltd, Shahin Properties Pty Ltd, The Bend Motorsport Park Pty Ltd, Thomas Foods International, University of South Australia.

Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit resulting from the conduct outweighs any public detriment. Authorisation is sought as the proposed conduct may contain a cartel provision or may have the purpose or effect of substantially lessening competition or be an exclusionary provision within the meaning of section 45 of the Act.

The ACCC may grant interim authorisation where the ACCC considers it appropriate to allow parties to engage in conduct while the ACCC is considering the substantive merits of the application. This interim authorisation will commence immediately and will remain in place until it is revoked or the date the ACCC’s final determination comes into effect.

Further information about the applications for authorisation is available on the ACCC Authorisations Register.

Release number: 
MR 49/17
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