Yesterday morning, in one of the best interviews of a public official I have ever heard, ACCC Chairman Rod Sims gave frank and informative replies to ABC Brisbane’s Steve Austin on the state of the electricity sector and the inquiry into electricity prices the Commission is currently running. As Chairman Sims noted in his introduction to an inquiry forum held at Brisbane’s Hotel Urban on Wickham Terrace last night, broadly speaking, power prices have doubled in real terms over the last decade on Australia’s east coast. This is of great concern to households and a wide variety of businesses, some of which are experiencing power price increases that are making their businesses unviable or forcing them to curtail operations and shed staff. It was good to see that Queensland industry was represented at Hotel Urban last night. Notably, a representative from Bundaberg Rum attended and addressed the forum regarding his concerns.
On both the radio and at the forum, Chairman Sims made it clear that the Queensland power generation industry is too heavily concentrated: two State-owned generation companies, Stanwell and CS Energy, control two-thirds of the generation capacity. As the companies asserted their market power earlier this year, by bidding high prices to supply electricity at times of shortages in the national electricity market, wholesale power prices in Queensland soared. In June, former Energy Minister Mark Bailey had to direct Stanwell, obviously the main culprit, not to take advantage of its market power, and wholesale prices have since dropped (see this ABC News report).
Nonetheless, Chairman Sims appears concerned that the underlying problem of market concentration in Queensland power generation remains. After Chairman Sims’s comments, the State Government really has no choice but to break up Stanwell and CS Energy, which operate multiple coal, gas, hydro and diesel plants, into a number of smaller generators, and to ideally privatise them (although dealing with the market concentration issue is the major concern). As part of its recent Powering Queensland plan, the State Government has announced it is investigating “the restructure of Government owned generators and the establishment of a ‘CleanCo’”. After Chairman Sims unequivocal comments on market concentration, that restructure will need to feature a major break up of the generation companies.
Also, see Steven Wardill’s article in today’s Courier-Mail:
ACCC Chairman Rod Sims