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
- Initiate
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- Final
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 estimator 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.