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ACCC tabs extra generators as potential power solution

An injection of new power generators into the East Coast energy market could solve rising costs for major consumers, the national competition watchdog reportedly believes.

The Australian Competition and Consumer Commission is undertaking a review of the energy market and alleged gaming of the system by a handful of generators, impacting long-term base level energy prices, much to the chagrin of major industrial consumers.

According to several reports, the watchdog has initially tabbed additional generators as a key solution to the wide-ranging issues.

According to one report in the AFR, ACCC commissioner Roger Featherstone said the authority “would agree with” a number of submissions to the ACCC review, which argued there were too few power generators in the market to provide legitimate competition.

Rio Tinto was among the major consumers to target energy generators in its submission to the inquiry, saying the level of competition varies across the network, but is for the most part lacking.

“In general, the scale of generators’ portfolios in Australia means there is a significant concentration of market power with a small number of generators in several states,” Rio said.

“Given the extent of generation under their control, these companies are able to propagate higher wholesale market prices and derive maximum advantage from additional volatility.

“This then has flow-through effects to the parallel contract market, allowing near-term high prices to set overall longer-term hedge contract prices and subsequent generation company portfolio gains.”

Rio says as an “inherently energy-intensive business,” it will work to lower its operating costs in any way possible, while maintaining environmental standards. It wants the ACCC to create a strict framework to monitor price levels and market behaviour for energy generators.

“As a general rule, for markets to be effective where a supplier has the ability to exercise significant market power, there must be an effective regulatory framework that offers certainty of access and prevents excessive pricing and other predatory behaviour,” it said.

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