A new report from the Victoria Energy Policy Centre has found that market power has been used to increase electricity prices in the National Energy Market (NEM) since the closure of the Hazelwood Power Station in 2017.
The report, authored by Bruce Mountain and Steven Percy, stated that the exercise of market power has had a large impact on consumers and producers, and is likely also to have a large impact on economic efficiency and the environment.
The authors argue that their conclusions raise obvious concerns about supply-side market concentration, and also about the design, operation and oversight of the wholesale market.
They also state that the importance of these impacts, not least in the context of further coal generation closure in future, merits serious consideration and policy response.
The report states “It may be the case that deeper examination of AGL’s procurement of coal for its Bayswater and Liddell power stations finds a higher level of constraint than we have concluded.
“If so, this should shift the focus of policy consideration to the way that coal supply constraints in New South Wales are priced in generators’ offers into the electricity market, and the extent to which electricity producers in New South Wales and elsewhere are able to profit from those constraints and so may be reticent in resolving them.”
“It may also be the case that deeper examination of the coal supply issues affecting Mount Piper and Eraring power stations and the operational issues affecting Vales Point finds that they are less constraining than we have concluded here.
“If so, this raises the prospect that the New South Wales generators may have colluded in the exercise of market power.”
To read the report, click here.
