To protect Victorian electricity consumers and business customers, the Australian Competition and Consumer Commission would oppose a proposed acquisition of Loy Yang Power by a consortium including AGL Limited, ACCC Chairman, Professor Allan Fels, said today.
Due to the tender process, commercial sensitivities and the parties' desire to maintain confidentiality, the ACCC did not propose to make a public statement about the matter.
"Now that the Victorian Government has gone public, it is appropriate to address misconceptions and misinformation about the decision", Professor Fels said.
A news release by the Victorian Minister for Energy Industries and Resources, Mr Theo Theophanous, states that a proposed bid for Origin Energy also could be blocked.
"No final decision has been taken on Origin's involvement in an acquisition of Loy Yang", Professor Fels said.
"However, it is certainly the case that many of the issues arising from AGL's proposed involvement are also relevant to an assessment of the competition effects of an Origin purchase".
The ACCC is concerned at the prospect of large scale generation and retail operations being put back together in deregulated markets where competition has yet to take root.
"It would be a perverse outcome to arrive at the end of the deregulation process with private monopolies replacing those that had been in place under State Governments", Professor Fels said.
Combining the biggest producer of electricity with a major retailer reduces the electricity available for other retailers. This reduces competition at the retail level for the supply of households and business and could lead to higher retail prices due to the substantial lessening of competition.
In comments regarding the state of the industry in Victoria Mr Theophanous said recently: "While we have seen competition emerging in the energy market, it is not yet fully effective when it comes to driving prices down".
He also said: "Increased competition is reflected in the growing number of consumers switching retailer, but it is not at a level to satisfy the Government".
The ACCC believes that while the Victorian energy sector is becoming more competitive, allowing the AGL acquisition to proceed would severely limit the further development of a competitive market and would likely inhibit, rather than encourage, retail competition.
"The ACCC is fully committed to ensuring a fully effective, competitive market that delivers benefits to all electricity consumers", Professor Fels said.
The proposed acquisition by AGL would have resulted in substantial cross ownership between the largest generator in Victoria and AGL's substantial Victorian electricity retail and distribution businesses.
In reaching this decision, the ACCC conducted a thorough investigation to determine the likely effect of the transaction on both the generation and retail sectors of the electricity supply industry in Victoria. This process involved contacting a wide range of market participants, including Government, customers and competitors.
The decision was made under the mergers provisions of the Trade Practices Act 1974.
"As a merger application this transaction would always be under the Trade Practices Act regardless of who is the energy regulator".