Restoring electricity affordability and Australia’s ...

1 Restoring electricity affordability a nd Aust ra lia s competitive advantage Retail electricity Pricing Inquiry Final ReportJune electricity Pricing Inquiry Final ReportISBN 978 1 920702 34 2 Australian competition and Consumer commission 23 Marcus Clarke Street, Canberra, Australian Capital Territory, 2601 Commonwealth of Australia 2018 This work is copyright. In addition to any use permitted under the Copyright Act 1968, all material contained within this work is provided under a Creative Commons Attribution Australia licence, with the exception of.

2 The Commonwealth Coat of Arms the ACCC and AER logos any illustration, diagram, photograph or graphic over which the Australian competition and Consumer commission does not hold copyright, but which may be part of or contained within this details of the relevant licence conditions are available on the Creative Commons website, as is the full legal code for the CC BY AU licence. Requests and inquiries concerning reproduction and rights should be addressed to the Director, Content and Digital Services, ACCC, GPO Box 3131, Canberra ACT notice The information in this publication is for general guidance only.

3 It does not constitute legal or other professional advice, and should not be relied on as a statement of the law in any jurisdiction. Because it is intended only as a general guide, it may contain generalisations. You should obtain professional advice if you have any specific concern. The ACCC has made every reasonable effort to provide current and accurate information, but it does not make any guarantees regarding the accuracy, currency or completeness of that information. Parties who wish to re-publish or otherwise use the information in this publication must check this information for currency and accuracy prior to publication.

4 This should be done prior to each publication edition, as ACCC guidance and relevant transitional legislation frequently change. Any queries parties have should be addressed to the Director, Content and Digital Services, ACCC, GPO Box 3131, Canberra ACT 06 electricity Pricing Inquiry Final ReportContentsExecutive summary ivRecommendations xviiAbbreviations

5 Xxvi1. Setting the scene 1 Part 1: Boosting competition in generation and retail markets 382. Wholesale market where are we now? 403. What has been driving wholesale prices? 544. Wholesale market is intervention required? 885. Contract markets and their impacts 1046. Retail competition 134 Part 2: Lowering supply chain costs 1547. Network costs 1568. Demand response and stand-alone power systems 2009. Environmental costs 21210.

6 Retail costs 221 Part 3: Improving consumer experiences and outcomes 23311. Levels of engagement 23612. Standing offer 24013. Advertising and marketing 25314. Tools to assist consumers in navigating the market 27415. Additional protections for vulnerable consumers 29116. Measuring outcomes and improvements in the market and appropriate tools for the AER 31817.

7 Is the current regulatory framework fit for purpose? 328 Part 4: Business customers 33318. Improving outcomes for business customers 335 Appendix 1: Terms of reference 355 Appendix 2: Summary of the Inquiry 356 Appendix 3: Relevant consumer protection work by other agencies 358 Appendix 4: Public submissions to the Preliminary Report 364 Appendix 5: Assumptions for achievable savings 366 Appendix 6: HoustonKemp: Investigating wholesale electricity market outcomes Methodology reportAppendix 7: HoustonKemp.

8 Analysis of NEM events Final results presentationAppendix 8: HoustonKemp: Impact of gas powered generation on wholesale market outcomes Final results presentationAppendix 9: HoustonKemp: International review of market power mitigation measures in electricity marketsAppendix 10: CSIRO: Residential electricity tariff analysesAppendix 11: The Brattle Group: International Experiences in Retail electricity Markets Consumer issuesAppendix 12: Colmar Brunton: Consumer Outcomes in the National Retail electricity Market Final reportivRetail electricity Pricing Inquiry Final ReportExecutive summaryAustralia is facing its most challenging time in electricity markets.

9 High prices and bills have placed enormous strain on household budgets and business viability. The current situation is unacceptable and approach to policy, regulatory design and promotion of competition in this sector has not worked well for consumers. Indeed, the National Energy Market (NEM) needs to be reset, and this report sets out a plan for doing ACCC s package of recommendations is wide ranging, which also reflects the nature of the mandate given to it by the Inquiry s terms of reference.

10 Some recommendations can be readily implemented within existing market, industry and policy structures. Others are more ambitious and their development and implementation may be challenging in the absence of a commitment by all participants governments, industry, regulators, policy makers, consumer bodies and consumers themselves to move away from existing modes of thinking and challenges should not prevent, or unduly delay, what we consider are necessary measures to restore affordability and Australia s competitive advantage in electricity .