icon-energy Review of the effectiveness of energy retail market competition in South Australia

  • Project Released: 25 Jan 2007
  • Project Closes: 14 Jun 2007
  • Contact: Amber Miller

Overview

In January 2007, the Commission appointed NERA Economic Consulting (NERA) to undertake a review of the effectiveness of energy retail market competition for small customers in SA (incorporating both electricity and gas).

The purpose of the review was two-fold: to inform the Commission's approach to the setting of electricity and gas retail standing contract prices across 2007/08; and to build on the extensive work undertaken by the Commission over several years in monitoring and reporting publicly on the SA energy retail market.

NERA has now completed this review and has concluded that competition appears to be generally effective in the electricity retail market for most small customers in SA and is well on the way to being effective in the gas retail market.

The Australian Energy Market Commission (AEMC) recently commenced a review of the effectiveness of competition in the Victorian energy retail market following a formal request from the Ministerial Council on Energy. The AEMC will conduct a similar review in SA during 2008. The Commission has maintained close contact with the AEMC during its current review of the SA energy retail market.

Status

Current status is Final

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Final

NERA has now completed all three phases of work. In Phase 2, NERA concluded that competition appears to be generally effective in the electricity retail market for small customers in SA and is well on the way to being effective in the gas retail market.

Nevertheless, NERA has recommended that the Commission continue to monitor the state of competition in these markets, particularly for those customers for whom competition is less effective due to the existence of barriers to entry or expansion.

Importantly, NERA's assessment of the electricity and gas retail markets is based largely on data up to and including December 2006, and has therefore not taken specific account of the impact of the current high wholesale electricity prices. Further, NERA has also advised that it is too soon to assess the longer-term market impacts of current moves to greater vertical integration in the energy industry. NERA's report should, therefore, be read in light of those provisos.

In Phase 3, NERA made a number of recommendations for changes to the Commission's current retail market development activities to enhance the effectiveness of retail competition in SA. The recommendations cover four main areas:

  • Enhancements to performance monitoring framework;
  • Compliance with the energy price disclosure code;
  • Enhancements to the sstimator service;
  • Approach to retail price regulation.

The Commission has not formed a view at this stage on the conclusions arising from the work of NERA, and believes it is appropriate that the Phase 2 and 3 reports be released for public comment before any such conclusions are formed.