Start-up power retailer Energy Locals has become the second market player in a week to hit out at the greed of some of Australia’s biggest fossil fuel generators, for their role in “deliberately” pushing up consumer electricity bills and generally manipulating the market.
In a submission to the ACCC inquiry into retail electricity supply and pricing, Energy Locals – which was launched in New South Wales and Queensland in March this year by former EnergyAustralia executive, Adrian Merrick – called for an investigation into wholesale market practices that manipulated prices and “hurt” customers.
“Unfortunately there appear to be deliberate strategies in place by owners of some generation portfolios to withdraw capacity in order to drive up wholesale energy prices,” it said.
The criticisms echo those of fellow energy market upstart, Enova, which last week blamed fossil fuel generators for the big increases in wholesale prices and consumer bills that came into effect on July 01, and from network owners previously.
In a letter to customers, Enova CEO Steve Harris, said the company was “deeply disturbed by the greed of a few fossil fuel generators,” which, together with a lack of government policy around future renewable energy targets he said had “resulted in a major market failure for which electricity consumers are having to pay a heavy price.”
Energy Locals’ ACCC submission, tabled on June 30 – which mainly focuses on questionable and “confusing” retailer pricing strategies – also seeks to highlight the questionable bidding practices of wholesale generators, which it said “at a more micro and regular level” were commonly understood, within industry, to manipulate prices.
“We have also witnessed the use of unpublished offers by large retailers in an attempt to retain departing customers,” the submission says.
“We have call recordings from customers who have told us that one very large retailer in particular has offered them a discount that is 45 per cent higher than its highest generally available market offer.
“Based on current wholesale prices we firmly believe this is an example of predatory pricing and would urge the Commission to investigate this area further.”
EnergyLocals is calling for the ACCC to launch an in-depth investigation into such practices, in particular for their role in driving up power prices.
“The huge increase in wholesale energy prices in recent months cannot be attributed to customers demanding more power, with electricity usage remaining broadly flat,” the submission said.
“We strongly urge the Commission to approach not just existing market participants but those who have previous experience of operating in these areas. This inquiry will not be effective if generators and traders can mark their own homework and submit it to the ACCC.”
Merrick – who is using his own knowledge of the industry to guide Energy Locals’ business strategy, by “dramatically reducing customers’ reliance on a grid they can’t control” – said in his introductory note to the ACCC that the Australian energy market was “broken.”
“Retailers are able to offer percentage discounts that are invented on whiteboards rather than via spreadsheets, and go so far as to report to analysts how low their overall discounts are,” Merrick said.
“When faced with low wholesale prices, generators think about what assets to close, mothball or put into maintenance.
“Some networks have spent years over-investing in assets that may not be required, and fight the decision of a regulator in the Federal Court,” he said – a reference to the costly and protracted legal battle between NSW network operators and the AER.
Merrick also had a message for Australia’s policy-makers and other regulators, noting that the nation’s renewable energy assets were “quietly growing” while political turmoil over their cost and benefit continued to divide national opinion.
“We need a plan that includes decisive and committed action, not short-term political point scoring that will be undone by someone’s successor or trashed by a minority of vocal dissenters,” he said.
“We therefore welcome the inquiry into energy supply and pricing. However, we do so with a note of caution: many of the factors driving prices up rest on factors that are not immediately visible when reviewing retail supply and pricing.
“We urge the ACCC to investigate the whole supply chain including factors such as market bidding behaviour that ultimately hurt customers.”