Consumer Action has made a submission to the Australian Competition and Consumer Commission (ACCC) in response to its Statement of Issues on AGL Energy Limited (AGL) proposed acquisition of the business and assets of Macquarie Generation (MacGen).
The submission concludes that there is a very high likelihood that the acquisition of MacGen by AGL will result in a substantial lessening of competition. If the acquisition were to proceed, this will translate into higher prices for consumers, possibly substantially so. AGL’s acquisition will drastically reduce the demand for contracts (in respect of its own NSW retail load). Even more importantly, it will drastically reduce contract supply (above and beyond AGL’s NSW retail load). This is because AGL will have an incentive to withhold MacGen capacity and in order to extract the gains from this commercial strategy, it will reduce the volume of MacGen production that it is willing to offer to the contract market.
The submission also raises concerns about AGL’s undertaking to resolve the ACCC’s competition concerns. This is due to the volume of capacity that the AGL is undertaking to contract being inadequate; the duration of the undertaking being inadequate; and the pricing arrangements for the contracted being opaque and susceptible to gaming. More generally, Consumer Action is sceptical that undertakings of any form can adequately address the competition concerns.
A full copy of our submission is available by clicking: AGL Energy’s proposed acquisition of Macquarie Generation.