Power prices fall as customers shop around and competition increases

https://www.theguardian.com/australia-news/2019/jun/28/power-prices-fall-as-customers-shop-around-and-competition-increases

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Power prices are coming down, customers are shopping around for better deals and there is more competition in the energy sector, according to an annual snapshot of the market from the Australian Energy Market Commission.

After a distinctly downbeat report in 2018, the AEMC says increased competition since its last assessment has led to decreases in consumer prices and reductions in market concentration in all markets except Tasmania.

It says new and emerging power retailers are driving lower prices and the retail market is starting to shift towards simpler and more comparable pricing structures, and greater product innovation.

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The AEMC reports five new energy retailers entered the market and five incumbents expanded their businesses into new jurisdictions since last year’s assessment. There were also record rates of customers switching retailers across the national energy market, with most switchers moving away from the big three power retailers towards smaller players.

While the improvements likely reflect the impact of intense political pressure on the retailers by the Morrison government, the AEMC also forecast last December that increased wind and solar generation would help drive power prices down by 2.1% on average in the next two years, with wholesale prices tipped to be driven down by an estimated 9,732MW of new generation and battery storage.

The new report, to be released Friday, points to looming regulatory changes that will reintroduce price regulation from 1 July. The changes include a reference price for discounts to be advertised against.

The AEMC says it will be examining the impact of those changes in its next annual snapshot, and will focus on “whether recent regulatory changes have benefited consumers and how they can be improved to act in the long-term interests of consumers”.

In addition to the regulatory changes, the Morrison government has flagged that it intends to reintroduce its controversial “big stick” legislation once parliament resumes which allows energy companies to be broken up if they engage in price gouging.

That proposal is deeply controversial in the energy sector and in business circles more generally. While Nationals MPs are maintaining pressure to bring the package back to parliament, the current expectation is it will not be reintroduced until after the winter recess.

If the proposal returns to parliament, and Labor maintains the position it took in the last parliament of opposing the change, the government will also face crossbench amendments to the package in the Senate seeking to make the proposed divestiture power economy wide rather than limiting it to the energy sector.

That idea, advanced by the Centre Alliance, is backed by some Nationals, but will be resisted strongly by Liberals who last year forced changes to the package.

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The AEMC chairman, John Pierce, said the new snapshot indicated there were positive signs of a more engaged consumer market and he said the entry of global battery providers like Tesla and Sonnen was a welcome development, because they were enabling new deals on solar PV options.

“Dominant players in the market are under pressure and I call on them to respond positively as consumers get to reap the benefits of a market where there are more participants and more real choices targeted to the specific needs of individual households,” Pierce said in a statement.

He noted there was considerable change ahead for Australia’s retail energy market with the reintroduction of retail electricity price regulation in Victoria, New South Wales, South Australia and south-east Queensland from 1 July.

Pierce said the commission would “work with governments to monitor the impacts of new policies and call out changes that disadvantage consumers or deny them access to the best possible offers”.