Australia's volatile power market killing competition - watchdog
08/12/2022 02:43
MELBOURNE, Dec 8 (Reuters) - Australia's competition
watchdog on Thursday warned that power bills are going up
because smaller energy retailers, unable to cope with soaring
and volatile wholesale markets, are shutting down, reducing
competition.
The report landed just as the government is hunting for ways
to cap wholesale gas and coal prices, which have rocketed due to
the Ukraine crisis, aiming to finalise a plan before Christmas.
Power competition has dwindled as six retailers have folded
since May, while other retailers have encouraged customers to
switch providers or refused to take on new customers, the
Australian Competition and Consumer Commission said in a report.
"High and volatile wholesale electricity spot prices,
coupled with high contract prices, reduced access to hedging
contracts, impending compensation payments and retail price caps
are impacting the financial viability of retailers," the
commission said.
It found that the remaining retailers raised offer prices
between April and October, increasing the median annual
household bill by 23%, or around A$300 a year, "and there are
signs this will increase further".
Smaller retailers were hit by the rising costs of managing
risk in a highly volatile, soaring market and led some to stop
using the Australian Securities Exchange (ASX) for hedging
contracts or refusing to take on new customers.
The overall impact has led to fewer offers from smaller
retailers, leaving households and small businesses less choice
for the best power deals below the so-called default market
offers allowed in each state.
"With prices expected to remain high, governments and
regulators need to ensure policy and regulatory settings around
energy affordability continue to evolve to better protect
consumers," the commission said.
The report was the latest stemming from an inquiry launched
in 2018 into prices and profit margins in the National
Electricity Market.
(Reporting by Sonali Paul; Editing by Simon Cameron-Moore)
((Sonali.Paul@thomsonreuters.com; +61 407 119 523;))