The head of Australia’s competition watchdog has quashed accusations from government MPs that AGL is misusing its market power by refusing to sell the Liddell power station to a rival – but says a lack of competition in the energy sector is inflating power prices for consumers.
Ahead of a major speech next week to the National Press Club on energy, the chairman of the Australian Competition and Consumer Commission, Rod Sims, said AGL refusing to sell Liddell was not a breach of competition laws.
But Sims told Guardian Australia in an interview on Wednesday that the energy market was too concentrated both in generation and in retailing, and that lack of competition, combined with tight supply, meant higher power prices.
The Turnbull government continued to pivot away from the specific clean energy target modelled in the Finkel review on Wednesday, and laid the groundwork for a new energy investment mechanism that would be friendly to coal-fired power.
With the return of bitter partisan hostilities on energy, and with the continuing lack of clarity over government policy, business leaders issued a pointed warning that it needed a decision quickly from the parliament, “or things could fall off a cliff in Australia”.
The Ai Group chief executive, Innes Willox, told Sky News the business community was “pretty much appalled by what they are seeing and hearing” in the current energy policy debate, and he put the Turnbull government on notice that business saw the Finkel review of the national electricity market as “a way out of a dark tunnel”.
The Clean Energy Council also warned the government that walking away from the Finkel recommendation of a clean energy target would be “a clear step in the wrong direction”.
The parliamentary day was again dominated by debate over energy. With the government now moving towards a decision on a new investment mechanism, a fresh bout of internal jostling has broken out within Coalition ranks.
Some conservatives have been positioning for a brawl on energy policy for months, and on Wednesday, the chairman of the Coalition’s backbench committee on energy, Craig Kelly, said he believed the government should push support for renewable energy out to the second half of the next decade.
He said an immediate priority should be to implement a “reliable energy target” to incentivise base-load power sources. Kelly’s idea echoes a similar call by the former prime minister Tony Abbott a week ago.
The deputy prime minister, Barnaby Joyce, is also upping the ante. Joyce has made it clear for a couple of months that the price of his support for a clean energy target will be coal getting certificates in the new scheme.
He signalled on Wednesday night his resolve to have coal in the mix had hardened since advice from the regulator about a shortfall in dispatchable power triggered by the closure of Liddell in 2022.
“We have new information as recently as this week with the Australian Energy Market Operator report coming out and saying we will be 1,000 megawatts short [when Liddell exits],” Joyce told the ABC’s 7.30.
In parliament, Labor homed in on rising energy prices, and pursued the prime minister about whether he remained committed to a clean energy target. Malcolm Turnbull said a new target had to be effective in delivering “not just a reduction in emissions but affordability and reliability”.
“It has to have built into it measures which support dispatchability, which support base-load power, which support affordability and reliability.
“It’s not an easy nut to crack”.
He said the government was working “very carefully” through the central recommendation of the Finkel review and new advice from the Australian Energy Market Operator about Australia’s dispatchable power needs once ageing coal assets retired.
The government has turned its sights on trying to pressure AGL to sell the Liddell power plant to a competitor, or keep it open for another five years, to keep more cheap base-load power in the system.
As part of the public strong-arming of AGL, the government over the past couple of days has raised concerns about the energy company’s market behaviour.
Speaking with Guardian Australia on Wednesday, Sims addressed some of the points raised in the political debate.
Sims said the ACCC had opposed AGL’s acquisition of two NSW coal plants, including Liddell.
“Our view was then and still is that was an anti-competitive acquisition. It led to basically about 85% of the generation capacity being in three hands, and those same hands have got about 85% of the retail market,” the ACCC chairman said.
He said when there was too much vertical integration in a sector like energy “it makes it hard for other players to get into the market”.
“We believe we were right to oppose that [acquisition] at the time and we believe that merger probably is contributing to higher power prices at the moment,” Sims said.
“I can’t put a number on it obviously, but having a less competitive market than I would have liked is putting pressure on power prices right at the moment.”
He said the closure of the Hazelwood and Northern power plants had tightened supply. “When you’ve got tighter supply/demand, the more concentrated the market, the higher electricity prices are.”
But he rejected arguments from the deputy prime minister Barnaby Joyce and from Craig Kelly that AGL might fall foul of competition laws for refusing to sell the Liddell plant to another energy player.
“To be a misuse of market power it has to meet a range of tests, and a company being not willing to sell an asset doesn’t meet those tests,” Sims said.
“I can’t see how it could be a misuse of market power as that is defined by our legislation.”
“Sometimes people think something is anti-competitive, it may well be, but that doesn’t mean it’s a breach of the act, and certainly it’s not in this case.”