BCA fears energy monopolies

LOBBY group the Business Council of Australia has warned that increasing consolidation of the energy sector could create vertically integrated energy monopolies.
In a submission to a Council of Australian Governments taskforce urging more progress on energy reform, the BCA said that no single company should be allowed to own both transmission and generation assets.
While the main target of the BCA appears to be the remaining non-privatised government-operated energy assets in NSW, Queensland and Western Australia, its view can be seen also as a warning to companies such as AGL and Origin not to continue to pursue vertical integration.
"There is considerable potential for common ownership to see transmission investment and operation used for private gain at the expense of effective market operation," the BCA submission said.
This week, AGL and Alinta will have shareholder meetings to consider their proposed $6.4 billion merger and, if it proceeds, AGL will emerge with ownership of gas transmission and generation assets. Origin already holds an interest in the energy supply chain from exploration to retail.
The BCA said that Australia was suffering from the slow pace of reform in the energy sector with benefits so far being limited.
The ACCC has expressed concern that national competition outcomes following the break-up of government-owned electricity monopolies could be eroded by the creation of equivalent monopolies in the private sector. In 2004, the ACCC failed to convince the Federal Court to accept this argument when it opposed the part purchase of the Loy Yang A power station by AGL.
The BCA submission noted that the creation of a national energy market - the key outcome of national competition policy in the 1990s - had promised greater competition and lower energy prices.
"But in reality, the benefits to date have been limited," it said.
The BCA said there was a lack of sufficient transmission infrastructure to encourage effective cross-border trading of energy between states, including spot trading.
It said network bottlenecks created production, investment and planning uncertainty for major energy users.
This uncertainty flowed also from the general lack of information from energy authorities about energy supply planning.
The BCA said cumbersome and inconsistent regulatory arrangements governing energy markets led to higher regulatory and business costs for companies operating across different states.
And its submission expressed concerns about potential under-investment in new generating capacity in NSW.
The BCA called for several reforms, saying it was essential to replace the current state-based, fragmented transmission planning system with a national transmission planning system.
Australia should move away from state-based regions in the National Electricity Market with regions reflecting market needs rather than political boundaries.