Australian Competition and Consumer Commission Chairman Rod Sims today warned that the energy reform debate must address the real drivers of the unnecessary electricity price increases in Australia.
In the last five years Australia’s electricity prices have on average increased by 90% in nominal terms, and by more in certain areas.
Speaking at the Energy Users Association of Australia Annual Conference Mr Sims said the debate needs to focus on three main issues - changing the flawed regulatory rules, fixing the Merits Review process, and allowing the regulatory process to set reliability standards to be met by network businesses.
“These problems will take time to address, but will have a significant effect on the level of future electricity prices,” Mr Sims said.
“The current debate over reform in the electricity sector is timely but there are some frustrating and worrying aspects to it”, Mr Sims said.
“While there have been many causes of the recent large increases in electricity prices, the Australian Energy Regulator (AER) along with other regulators such as IPART in NSW, have been warning for many years about these three issues driving significant and unnecessary increases in the price of electricity for Australian business and consumers.
Again, these issues are: the flawed regulatory rules, problems in the Merit Review process, and concerns over the costs imposed by higher standards to be met by network businesses,” said Mr Sims.
“The response to these issues from some in industry is to blame the AER for the recent electricity price increases. There is a simple logic to be applied here; if the three issues driving the unnecessary price increases are properly understood, how can anyone blame the AER for rising electricity prices? If these three issues are not understood, then how can we address them?
“Changes need to be made and their effective implementation is crucial. For effective implementation we need to rely significantly on the AER, the regulator that has raised and championed these issues,” Mr Sims said.
Mr Sims acknowledged the current debate over the ‘independence’ of the AER.
The accusation is that the AER, as part of the ACCC, is too focussed on consumers and influenced by a competition culture.
“Both the ACCC and the AER have a mandate to work in the long term interests of consumers and this is how it should be. It means addressing unnecessary price increases for consumers and small business head on. It is difficult to see how making the energy industry regulator less independent and more responsive to industry can be in the long term interest of electricity consumers,” Mr Sims said.
“Indeed, a fundamental part of the desired future reforms is to give consumers a significantly enhanced role in the regulatory and wider processes of the energy market.
“This will involve a larger role for both business and household consumers and, of relevance today, for the Energy Users Association of Australia,” he said.
Mr Sims noted that the EUAA has been playing an increasingly effective role, and that the envisaged changes will increase this role significantly.