National electricity market - Rebidding code changes: Draft determination

4 July 2002

The Australian Competition and Consumer Commission has issued its draft determination relating to changes to the rebidding rules contained in the National Electricity Code.

The changes, proposed by NECA, are designed to address behaviour considered to be detrimental to market outcomes. The changes respond to concerns of market power being exercised in the National Electricity Market to influence higher prices.

In its determination, the ACCC agreed to authorise the requirement requested by NECA that generators' bids must be made in good faith. The ACCC agreed that bids should represent a generator's honest intentions.

The ACCC rejected the code change that sought to prevent bids or rebids deemed to be prejudicial to market outcomes as it did not accept that the benefits of the rejected changes would outweigh the anti-competitive detriment.

The ACCC believes that market power in the NEM stems largely from the market’s structure and factors such as barriers to demand side participation and barriers to trade within the NEM. While rejecting a number of the proposed code changes, the ACCC remains concerned about bidding behaviour because of the potential to create inefficient market outcomes. Recent generator bidding behaviour in the NEM has heightened concerns that strategic bidding behaviour in the market is having a significant impact on average prices. In this light, the ACCC will maintain a close watch on the performance of the market.

Further, the ACCC believes that in the absence of further structural reforms in the generator sector, explicit rules governing bidding behaviour may have to be introduced. The ACCC has made several suggestions in the draft determination in that context.

The ACCC calls on NECA to use the authorised code changes, in conjunction with its market monitoring powers under the Code, to investigate behaviour that is of concern.

The ACCC remains committed to enforcing the Trade Practices Act and will take action if it receives evidence that a breach of the Act has occurred.

A copy of the draft determination is available from Mrs Maxine Helmling on (02) 6243 1246.

Links

Release number: 
MR 168/02
ACCC Infocentre: 

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