Fixes for electricity overcharging ambulance at bottom of cliff, as wholesale market reaches record highs.
Flick says the fixes proposed are dealing only with the symptoms of a poorly functioning wholesale electricity market.
The Electricity Authority (EA) today released its proposal for correcting the market after water was spilled needlessly from hydro dams in December 2019, reducing competition and driving up prices on the wholesale electricity market.
Flick Chief Executive, Steve O’Connor, says the EA’s proposed fix, which would reduce energy costs by around $80 million for the period of the undesirable trading situation seems fair and reasonable, and the proposal is a job well done by the EA for addressing the specific situation.
However Steve says this alone does not address current low confidence in the wholesale market.
“If the market design and incentives for fair competition were right, the EA wouldn’t have to spend considerable resources policing and penalising generators.”
Steve says to truly restore faith in the wholesale market, the EA needs to urgently focus on a review on the wholesale market and consider appropriate market reform. Most critically, making all power companies buy from the same electricity market and on the same terms.
“December 2019 was just one example of when prices should have been low and they weren’t, and there’s nothing in place to stop a repeat or actions underway to change the market incentives that motivated this to happen.”
“Current wholesale market prices are unusually high and we have to ask if this is another example of market failure. While it’s not dam spilling this time, the ultimate reason we have high wholesale prices is not fully explained by current market conditions.”
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