Australia’s biggest coal generator and polluter AGL Energy is facing a class action – led by a South Australian pub owner – alleging the abuse of market power in South Australia.
The class action is being led by an entity called SA Country Pubs Pty Ltd, which used to be known as the Griffins Head Hotel and which is now known as the Griffins Hotel.
One of the directors is Greg Columbus, who is also managing director of Clarke Energy, which specialises in distributed gas and diesel power-generation solutions.
The question of market power has been a recurring theme in Australia’s electricity market, particularly given the lack of competition in the wholesale market.
Consumers often wonder why the influx of renewables has not lowered prices as promised. The answer is that the prices are still controlled largely by fossil fuels and hydro, and the ownership of those assets remains incredibly concentrated.
South Australia is considered a special case because the concentration of ownership has been particularly severe, even though some of that pricing power has been relieved by the growth of renewables, and battery storage, in recent years.
The focus of market power has been raised by former ACCC boss Rod Sims, as part of his new partnership with Ross Garnaut to turn Australia, and particularly South Australia, into a renewables superpower.
Sims believes that having significant amounts of new green industrial demand, served by large amounts of new renewables and storage capacity, will take over the pricing power enjoyed by the legacy market players.
A report last year from the Australian Energy regulator noted that “a few large participants continue to control a significant portion of generation capacity” across the market. It said “this continues to provide incentives for certain participants to exercise market power.
“Compounding this issue, base load and flexible generation remain particularly concentrated among a small number of participants, potentially diminishing competition during periods of supply stress and at certain times of the day.”
The issue came to a head last year when the market breached the price cap, forcing an unprecedented level of suspicion of the market.
The AER report noted that in South Australia, AGL Energy, Origin Energy and Engie controlled 64% of the region’s generation capacity (up from 50%) and 73% of its output, in 2021/22.
AGL Energy said in a statement that has been served with class action proceedings in the Federal Court, which allege breaches of section 46 of the Competition and Consumer Act 2010 (Cth) in relation to bidding in the South Australian Region of the National Electricity Market (NEM).
“The NEM is a regulated wholesale electricity market operated by the Australian Energy Market Operator, with the Australian Energy Regulator undertaking compliance monitoring and enforcement,” it said in a brief statement.
“AGL takes its compliance obligations seriously and intends to vigorously defend the proceedings.”
