Brian Robins Electricity July 19, 2012
THE electricity market regulator has been warned it could face legal action, such as a possible class action, following claims that it fumbled a review of market price manipulation which is estimated to have cost power users hundreds of millions of dollars.
The Major Energy Users, a loose consortium of large industrial energy users, has warned the Australian Energy Market Commission of the potential legal exposure following a review of claimed manipulation of wholesale electricity markets in South Australia.
In a review, completed recently, the commission conceded wholesale prices in South Australia were unusually high for a time between 2007 and 2010, although it argued the higher prices were ''transient'' and did not reflect the ''substantial market power'' of electricity generators.
The concerns relate to wholesale electricity price movements in South Australia, although the lobby group argues price manipulation could occur in any part of the national market at any time.
Wholesale prices in South Australia are typically higher than elsewhere, which could be due to a lack of generator competition.
Prices are also high in NSW, which could reflect the high concentration of ownership. as Macquarie Generation and Delta Electricity account jointly for around a quarter of the national electricity market, and more than three-quarters of the NSW market.
The Major Energy Users group is calling for the Australian Energy Regulator to assess which electricity generators in each region of the national market is a ''dominant generator'', holding enough power to influence prices during periods of high demand.
And, when regional demand exceeds the level at which a generator has been declared to be a ''dominant generator'', this operator must then offer all of its output at less than the administered wholesale price cap of $300/MWh.
This would take pressure off wholesale electricity prices, helping to lower household and industrial electricity bills.
AGL paid $417 million for Torrens Island power station five years ago. Major Electricity Users estimates that in one year alone the claimed price manipulation cost South Australian consumers as much as $200 million in higher prices.
''Market concentration is a problem, especially when combined with vertical integration,'' the group told the AEMC this week.
Vertical integration in the electricity market has risen in recent years as generators such as AGL, Origin Energy and TruEnergy have increased their sway over the retail electricity market, which has enabled them to lift profit margins.
AGL has consistently denied it manipulated prices in South Australia in the period in question.
Major Energy Users claims that if the draft decision of the regulator goes unchallenged, it will allow power generators to force prices higher than they would otherwise be in a truly competitive market.
The AEMC last month issued a draft decision on the proposal put by the MEU. It said its deliberations were continuing.