The ACCC has issued a draft determination proposing to allow businesses in the new Eastern Energy Buyers Group (EEBG) to run joint tender processes for electricity and gas.
EEBG’s members operate in the agriculture industry and are industrial energy users. Members have significant operations in Victoria and some operations interstate. The proposed joint tender process would cover supply for electricity, gas and gas transport services to members of the group.
The authorisation would also allow other industrial energy users to join the group, provided the combined annual energy consumption does not exceed 16 Petajoules of gas or 4.5 Terawatt hours of electricity, which is around 10 per cent of Victorian consumption.
“The ACCC considers that the joint tendering process is likely to result in public benefits. It would enable the group to seek more competitive pricing and terms through combining their gas and electricity demands,” ACCC Chairman Rod Sims said.
Aggregating the groups’ demand and jointly tendering for long term contracts may also provide incentives for investment in new generation, such as a small-scale power purchase agreement where EEBG would commit to acquiring the generator’s capacity up front.
Joint tendering is also likely to help EEBG group members jointly share costs for services such as negotiating and legal services.
“There will be minimal public detriment from the proposed conduct. EEBG’s members currently account for a relatively small proportion of total demand for both gas and electricity in Victoria”, Mr Sims said.
On 1 September 2017, the ACCC granted interim authorisation to allow the group to commence the tender process on the basis that the group would not enter into a supply agreement with the successful tenderer(s) unless or until the ACCC makes a final decision granting authorisation.
The ACCC proposes to grant authorisation for 11 years.
The ACCC is seeking submissions on its draft determination before making a final decision.
Background
Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010.
Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit resulting from the conduct outweighs any public detriment. Authorisation is sought as the proposed conduct may contain a cartel provision or may have the purpose or effect of substantially lessening competition or be an exclusionary provision within the meaning of section 45 of the Act.