Mining and Heavy Industries

Rio lashes energy generators in ACCC submission

Mining giant Rio Tinto has used the Australian Competition and Consumer Commission’s electricity supply and pricing inquiry to slam east coast electricity generators for allegedly using their excessive market power to drive up prices.

Despite claims from the east coast’s three largest energy generators – AGL, Origin and EnergyAustralia – that the National Energy Market is fair and competitive, Rio argued in its submission to the inquiry – which was ordered by the prime minister – that the market is not working for major consumers.

“The current regulatory framework of the NEM appears unable to curb the clear exercises of market power which have become increasingly apparent with shifts in ownership, asset closure and in some cases, consolidation of generators whose behaviour is unconstrained by considerations of affordability of electricity,” the miner said in a four-page submission.

Rio says the level of competition varies depending on where you are on the NEM, but for the most part it is 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,” the submission states.

“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,” the submission states.

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