The ACCC has released its latest Electricity Markets Inquiry report, including an update to reflect current market conditions that shows electricity price rises have been significant and unprecedented in recent weeks.
During the first two weeks of June, wholesale electricity spot prices rose significantly. Volume weighted average spot prices ranged from $341/MWh to $590/MWh depending on region, roughly 5 times higher than in quarter 1 2022. Base futures contracts also became significantly more expensive, reflecting market expectations of a sustained period of high wholesale prices.
“There is no doubt that international factors such as the war in Ukraine have heavily impacted the global gas supply and prices. A cold start to winter and a reliance on ageing coal-fired power stations amplified challenges already facing the Australian energy market,” ACCC Chair Gina Cass-Gottlieb said.
“We are acutely aware of the pressures that rapidly rising energy prices are placing on Australian households and businesses. We are working closely with our colleagues at the Australian Energy Regulator to monitor the market and to take action against conduct harming competition or consumers and to preserve the competitiveness of our energy markets.”
In response to these building challenges, the Australian Energy Market Operator (AEMO) suspended operation of the National Electricity Market last week. This provided the market operator the best avenue in the circumstances to ensure secure and reliable supply of electricity.
Treasurer’s request to report on current energy market crisis
The Treasurer recently wrote to the ACCC about our role in addressing the energy crisis.
“Under direction from the Federal Government, we will use our full information gathering powers to provide greater transparency around the factors influencing electricity and gas prices, including profits and margins from a wide range of energy companies.” Ms Cass-Gottlieb said.
“In line with the Treasurer’s request, we will also assess and bring to the government’s attention any need for regulatory change to ensure electricity and gas markets function properly for the benefit of all Australian consumers.”
“In addition, the Federal Energy Minister with State and Territory Energy Ministers have requested the ACCC, as part of its ongoing inquiries on the national energy market, to report back in July 2022 ,” Ms Cass-Gottlieb said.
Making sure energy companies comply with the law
The ACCC actively monitors retailer offers to supply electricity and can take energy retailers to court if they mislead consumers.
“Working jointly with the AER, we have written to energy retailers to remind them of their obligations in relation to electricity prices under the Competition and Consumer Act and the National Electricity Retail Code,” Ms Cass-Gottlieb said.
Retailers cannot set the price of their standing offers above the ‘safety net’ Default Market Offer set by the AER, or (in Victoria) the Victorian Default Offer set by the Essential Services Commission.
The ACCC also enforces legislation aimed at preventing anti-competitive conduct in the electricity market. Part XICA of the Competition and Consumer Act (the Prohibiting Energy Market Misconduct laws) bans generators from manipulating the spot market, for example by withholding supply to inflate prices. It also penalises generators that withhold electricity contracts for the purpose of substantially lessening market competition. We will be closely watching market behaviour in coming months to ensure these rules are not being broken.
Protecting Australian consumers
Many Australians are worried about the prospect of higher energy bills. In some cases, retailers have contacted customers advising that their prices will go up and suggesting that they switch provider.
“The market is changing rapidly so keep up to date about your plan and the prices you’re paying.” Ms Cass-Gottlieb said. “It may also be harder to find another plan at the moment, as some retailers are not accepting new customers. Nevertheless, it is important to ensure that customers shop around to ensure they are on the best deal available to them.”
The ACCC has also published guidance for consumers on our website in response to recent events. This covers things like questions you can ask your retailer about your current plan, or what to do if you need help paying your energy bill.
Market insights from 2021
The report published today is the seventh report in our ongoing inquiry into prices, profits and margins in the National Electricity Market. The most recent report is based on billing data collected from retailers through to the end of the 2021 calendar year.
This series provides unique insight into electricity bills and allows us to quantify changes over time. It shows the extent of the decline in household electricity bills in 2021, prior to the recent upswing. It measures the impact of switching to a cheaper market offer instead of the standing offer, and how much better off consumers were if they had solar panels. It also describes how people facing financial hardship had the highest median bills, largely as a result of their higher electricity usage.
“Further work will be carried out to scrutinise costs, including understanding the net impact of wholesale price changes and hedging contracts as well as analysis of retail costs and retail margins to assess the financial viability of energy retailers,” Ms Cass-Gottlieb said.
The May 2022 report examined the residential and small business billing data of 10 electricity retailers, who together supply the vast majority of electricity customers across the National Electricity Market states of New South Wales, South Australia, South East Queensland and Victoria.
The addendum to the report examined changes in electricity markets in May and early June.
Western Australia and the Northern Territory are not connected to the National Electricity Market. Tasmania, the Australian Capital Territory and regional Queensland are not included in the report as most customers in these areas are on regulated offers.
In August 2018, the then Treasurer, the Hon Scott Morrison MP, directed the ACCC to hold an inquiry into the prices, profits and margins in relation to the supply of electricity in the NEM. This is the seventh time the ACCC has reported as part of this inquiry.
The Australian Energy Market Operator (AEMO) issued a media release after it suspended operation of the National Electricity Market.
The report and addendum are available on the ACCC’s website at Electricity market monitoring 2018-2025.
The ACCC is required to report at least every 6 months.