One of the big policy debates around Australia’s energy markets is whether private or government ownership is best. Australia has a lot of both, and as far as we can tell both can be as bad – or in certain circumstances, as good – as the other.
The latest news from Western Australia should disabuse many who hold an attachment to government-owned utilities as being a panacea to the soaring high prices that has drained the pockets of consumers.
The Economic Regulation Authority has pinged the state-owned generator, Synergy, for gouging consumers relentlessly over a 15-month period, alleging its bidding patterns increased costs to consumers by up to $192 million over what the market rules would normally allow.
To put this into perspective, that relates to about 15 per cent of the total value of the wholesale market in the state, and the ERA found gouging in 12,909 thirty minute intervals out of the 14,812 investigated. If true, this was not an accidental push of the wrong pricing button, so much as a systematic pattern to gouge consumers.
The ERA will now launch proceedings against Synergy before the Electricity Review Board, where the penalties can be steep – $50,000 for a first contravention and $100,000. So if the company broke the rule nearly 15,000 times, that could be a fine of more than $1 billion.
The ERA concerns are over what is known as the “balancing market” in the local wholesale market, known as the South West Interconnected System. Synergy dominates the market with 30 different generators, and they are supposed to bid within shouting distance of the short run marginal costs, which include fuel and start up costs.
The ERA says this didn’t happen.
“The ERA has calculated a reasonable expectation of the short run marginal cost of generating the relevant electricity for the 12,908 trading intervals, to estimate the effect of Synergy’s pricing behaviour on the balancing market,” it says in a report finding that has been delayed three times since early last year.
“Based on this calculation, Synergy’s pricing behaviour resulted in an increase in the total cost of electricity settled in the balancing market of between $100 million and $192 million and increased Synergy’s revenue by between $40 million and $102 million.”
Contrast this to the eastern states, where the farce that is regulatory oversight has been unable to find any evidence of wrong-doing – despite all the big utilities filling their vaults, rewarding their shareholders and flinging bonuses to top executives after trebling the margins from the wholesale electricity markets over the last two years.
The ACCC and the Energy Regulator blithely talk about the “exercise of market power”, occasionally referring to the “shifting of pricing capacity” to different bidding bands as though it was a community service.
The AER would be hard pressed to find any wrong-doing because it is not even allowed to interview the traders, courtesy of the rules borne out of the complete regulatory capture that the industry has held over government and rule-makers in this country, and which they are loathe to let go.
Synergy has not formally replied to the ERA findings.
When the inquiry was launched, in 2017, it denied engaging in :any inappropriate or anomalous market behaviour” in relation to the pricing of offers in its Balancing Submissions.
“Synergy has in place robust checks and procedures to ensure that it complies with its legal and regulatory obligations,” it said at the time.
But the investigations may not stop there. The prices for the 2017/18 financial year and since have not shown any reduction. The ERA has not started investigations for that time period.
Synergy is the dominance electricity generator and energy retailer in the state’s main grid.
- It owns coal and gas plants Collie, Kwinana, Cockburn and Pinjar, smaller gas plants at Mungarra and West Kalgoorlie, and a joint venture power station at Worsley Alumina refinery near Collie.
It also owns wind farms at Albany, Esperance, Kalbarri and Mumbida, a solar farm near Geraldton and wind-diesel systems in Bremer Bay, Coral Bay, Denham and Hopetoun.