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AGL bid to buy power generator sparks energy price fears

Canberra Times logo Canberra Times 25/05/2014 Brian Robins

Consumers will be losers if one of Australia's largest integrated energy companies, AGL, is allowed to acquire the biggest single electricity generator, Macquarie Generation, the Australian Competition Tribunal has been warned.

AGL's deal to acquire the generator has been blocked by the competition watchdog, the Australian Consumer and Competition Commission, over concerns the move could reduce market competition. The matter is now before the Australian Competition Tribunal for a ruling on whether it should be allowed to proceed.

''We don't need a 'big three' power providers,'' Matt Levy, campaign director of the consumer lobby group Choice said.

''We already have two big supermarket operators, the big four banks.

''Will the benefits of [electricity] market integration accrue to the end-users, the consumers?

''There's not enough pressure to pass on any benefits to households.''

Choice said the three largest energy companies - AGL, Origin Energy and the Hong Kong-controlled EnergyAustralia - already controlled an estimated 77 per cent of the market for small electricity users and as much as 85 per cent of the gas market.

The Australian Energy Regulator has estimated that, in four of the six jurisdictions of the electricity market, the three big retailers account for more than 90 per cent of the electricity and gas markets.

''In addition, substantial vertical integration exists between retailers and energy producers,'' the regulator noted in a recent report. This is when the electricity generators also control the retail sales market, allowing them to lift operating margins.

The big four banks control more than 80 per cent of the market for home loans and household deposits, while supermarket duopoly Coles and Woolworths hold more than 70 per cent of that market.

The electricity deal came in the wake of the move to deregulate the market in NSW which will give the retailers even greater power.

Pointing out that, even with deregulation, prices in Victoria had moved in tandem with other markets, Choice said the high level of ''switching'' between retailers in Victoria, for example, was not evidence that competition was effective as it only served to inflate costs, which then were passed on to consumers.

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