The Australian Competition and Consumer Commission proposes not to revoke AGL's (South Australia) current authorisation of South Australian electricity vesting contracts.
In a draft determination issued today, the ACCC proposes not to revoke the existing authorisation and thus not to substitute the existing conditions with new conditions proposed by AGL(SA). AGL(SA) owns the electricity retail business supplying small and medium sized businesses and customers on regulated tariffs in South Australia. It requested that extra conditions be added to the authorisation requiring:
- a look-back mechanism to operate so that the actual wholesale cost of electricity purchased under the vesting contracts for customers on regulated tariffs would be reconciled each year with a target of $40MWh;
- the use of customer rebates if the actual purchase cost fell below $40MWh;
- changes to a contract providing insurance against interconnector outages so that it operates in a wider range of circumstances.
"The ACCC has closely examined these issues in terms of overall competition in the SA electricity market and in terms of the original authorisation", Mr Rod Shogren, Commissioner with responsibility for energy matters, said today. "The ACCC has real concerns that accepting the AGL(SA) proposals would give it additional advantages, relative to other retailers and customers.
"The ACCC recognises that SA is a tight market in terms of supply and price volatility, with all parties bearing some of that risk, and the draft determination has considered issues raised regarding market power and rebidding by generators. However, the proposed conditions would give extra protection to AGL(SA) without resolving the fundamental problems. Those problems will only be fixed with new investment in generation and interconnection".
The draft determination also explains the ACCC's views on the conditions imposed in the original authorisation, in response to claims that differing interpretations of the existing conditions had created uncertainty in the SA electricity market. The vesting contracts run till 2003 and set the prices and quantities of electricity sold by the three main SA generators to AGL(SA) for the supply of franchise and grace period customers who are still on regulated retail tariffs and have not yet entered the contestable market.