Soaring electricity costs putting SMEs under ‘unacceptable pressure’, ACCC inquiry finds

electricity

Rising electricity costs over the past decade are a “drain on business productivity,” according to the Australian Competition and Consumer Commission’s inquiry into the national electricity market.

The commission’s preliminary report into retail electricity pricing highlights concerns about the operation of the National Electricity Market, which pose an “electricity affordability problem” for consumers and businesses.  It states that electricity prices faced by households and most small businesses have risen between 80% and 90% since 2007-08 and that while small businesses generally pay prices in line with residential customers, they do not receive all the same consumer protections under the National Energy Retail Law.

The report also identifies “insufficient competition” in the electricity market, with AGL, Origin and EnergyAustralia – the ‘big three’ vertically integrated gentailers (i.e. retailers that generate and retail electricity) – making it difficult for smaller retailers to compete because they control in excess of 60% of generation capacity in NSW, South Australia and Victoria.

“This market dominance has led to non-vertically integrated retailers having limited access to risk management products, and outcomes for consumers and businesses are being driven by pricing practices that are not consistent with vigorous competition,” the report explains.

In a statement on the preliminary report, ACCC Chairman Rod Sims said the commission had heard many example of the difficulties small businesses are facing in engaging with the retail electricity market.

“What’s clear from our report is that price increases over the past ten years are putting Australian businesses…under unacceptable pressure,” he said.

“Businesses are faced with a multitude of complex offers that cannot be compared easily. There is little awareness of the tools available to help consumers make informed choices or seek assistance if they are struggling to pay their electricity bills.”

“Many of these issues arise from unnecessarily complex and confusing behaviour by electricity retailers, and in some cases this appears to be designed to circumvent existing regulation.

“There is much ill-informed commentary about the drivers of Australia’s electricity affordability problem. The ACCC believes you cannot address the problem unless you have a clear idea about what caused it.

“Armed with the clear findings on the causes of the problem, the ACCC will now focus on making recommendations that will improve electricity affordability across the National Electricity Market.”

See also: Rising energy costs curtailing SME growth; Ombudsman blames price gouging, politics and ‘Owning the moral high ground’: Energy Bill Doctor’s plan to disrupt the energy sector.