❓ Opposition questions the Minister for Energy about anti-competitive practices by Synergy following its re-merger with Verve. The Minister defends Synergy's actions, stating they are competing in the contestable market and losing market share, while accusing the private sector of seeking government subsidies.
AnsweredQoN 814Legislative Assembly
QuestionView source ↗
SYNERGY — ECONOMIC REGULATION AUTHORITY —
ANTI-COMPETITIVE PRACTICES
814. Mr M. McGOWAN to the
Minister for Energy:
I refer to the minister's comments directed at the
Economic Regulation Authority in June over its report into the effectiveness of
electricity regulations after the re-merger of Synergy and Verve when he
labelled the report ''an embarrassment on the part of the ERA''.
(1) Have the
minister and his office not received a number of complaints from electricity
businesses in writing, including Kleenheat, ERM Power Ltd, Amanda Energy and
Community Electricity, over anti�competitive practices by the re-merged
Synergy?
(2) What
actual steps has he taken to address and end these serious anti�competitive
practices by Synergy, as claimed by these companies?
ANTI-COMPETITIVE PRACTICES
814. Mr M. McGOWAN to the
Minister for Energy:
I refer to the minister's comments directed at the
Economic Regulation Authority in June over its report into the effectiveness of
electricity regulations after the re-merger of Synergy and Verve when he
labelled the report ''an embarrassment on the part of the ERA''.
(1) Have the
minister and his office not received a number of complaints from electricity
businesses in writing, including Kleenheat, ERM Power Ltd, Amanda Energy and
Community Electricity, over anti�competitive practices by the re-merged
Synergy?
(2) What
actual steps has he taken to address and end these serious anti�competitive
practices by Synergy, as claimed by these companies?
AnswerView source ↗
I thank the member for the question—particularly from
him.
(1)–(2)
It is very interesting. When we merged Synergy and Verve, we increased the
dominance of the firm and we put into place, first, ring-fencing wholesale and
retail, and we required the entity to offer to the public wholesale products at
wholesale prices. Energy is very complicated. There is a range; a single price
cannot just be provided. It depends on the time of day, the time of year, the
duration of the contract and also the volumes and the take-or-pay contract. It
is an extremely complex arrangement. Synergy has been providing those for over
a year now. It has not been widely taken up by the private sector. There have
been some complaints in the private sector that the price that Synergy is
offering in those wholesale contracts is not enough for those companies to buy
and get a profit by selling it in the contestable market. In the retail market
for small businesses and households, Synergy remains a monopoly. What the
private sector wants to do is buy the energy from Synergy, turn around and sell
it in the contestable market and make a profit without Synergy competing
effectively with it. The private sector companies have come to me and said that
Synergy is not providing them with a low enough price for them to win contracts
from Synergy.
Mr M. McGowan : They
are saying that Synergy is undercutting them and using its dominance.
Dr M.D. NAHAN :
Yes, they are saying that Synergy is competing with them in the contestable
market. Yes, it is. The question is: is it doing this in an uncompetitive
manner? That is the question. Synergy is in the contestable market. It has
been. It was set up to be in it when Labor set up the market. It remains in it
and, by the way, it is losing market share very drastically. The private sector
is out there complaining that Synergy is using monopoly tendencies and losing
market share at the same time. That does not make much sense to me. What I have
done is I have asked Synergy to do a thorough review of it.
Mr
M. McGowan : Of itself?
Dr
M.D. NAHAN : Yes.
Several members interjected.
The
SPEAKER : Members!
Dr
M.D. NAHAN : Yes, I have asked it to do a thorough review of it and also to
answer all the questions and to have the Public Utilities Office oversee it.
The Leader of the Opposition also
referred to the ERA. The ERA was given a mandate to do exactly what I have just
said Synergy is doing—that is, to look at the purchases, look at the
pricing in the contract and report to the government as to whether or not it is
competitive. The first report it did this year stated that it did not have the
time or the information to do the study, so it was not done. It gave us some
ideas that it might be a threat to competition, but it did not do the review
because it did not have the numbers or capacity to do it. So we set up the ERA
to do the review. It did not do it. People did complain. We asked Synergy and
the PUO to look into it. That is what we are doing. I will be quite clear; the
private sector is out there and has a system whereby it becomes reliant on
subsidies by the government—for the government to take the risk and it
to take the profit. These guys opposite might like that arrangement. That is
the system they set up, but we are going to ensure that there is real
competition out there. When the private sector comes on and takes market share and
sells electricity, it takes the market risk. We are not going to subsidise it.
That is what this issue is about. The Labor Party is looking for some
corporatist game whereby Synergy subsidises its mates in electricity. We are
not going to do it. But we will ensure that the system we set up works
effectively and that the private sector can get a wholesale price equivalent to
what Synergy's wholesale price section pays to the resale sector.
him.
(1)–(2)
It is very interesting. When we merged Synergy and Verve, we increased the
dominance of the firm and we put into place, first, ring-fencing wholesale and
retail, and we required the entity to offer to the public wholesale products at
wholesale prices. Energy is very complicated. There is a range; a single price
cannot just be provided. It depends on the time of day, the time of year, the
duration of the contract and also the volumes and the take-or-pay contract. It
is an extremely complex arrangement. Synergy has been providing those for over
a year now. It has not been widely taken up by the private sector. There have
been some complaints in the private sector that the price that Synergy is
offering in those wholesale contracts is not enough for those companies to buy
and get a profit by selling it in the contestable market. In the retail market
for small businesses and households, Synergy remains a monopoly. What the
private sector wants to do is buy the energy from Synergy, turn around and sell
it in the contestable market and make a profit without Synergy competing
effectively with it. The private sector companies have come to me and said that
Synergy is not providing them with a low enough price for them to win contracts
from Synergy.
Mr M. McGowan : They
are saying that Synergy is undercutting them and using its dominance.
Dr M.D. NAHAN :
Yes, they are saying that Synergy is competing with them in the contestable
market. Yes, it is. The question is: is it doing this in an uncompetitive
manner? That is the question. Synergy is in the contestable market. It has
been. It was set up to be in it when Labor set up the market. It remains in it
and, by the way, it is losing market share very drastically. The private sector
is out there complaining that Synergy is using monopoly tendencies and losing
market share at the same time. That does not make much sense to me. What I have
done is I have asked Synergy to do a thorough review of it.
Mr
M. McGowan : Of itself?
Dr
M.D. NAHAN : Yes.
Several members interjected.
The
SPEAKER : Members!
Dr
M.D. NAHAN : Yes, I have asked it to do a thorough review of it and also to
answer all the questions and to have the Public Utilities Office oversee it.
The Leader of the Opposition also
referred to the ERA. The ERA was given a mandate to do exactly what I have just
said Synergy is doing—that is, to look at the purchases, look at the
pricing in the contract and report to the government as to whether or not it is
competitive. The first report it did this year stated that it did not have the
time or the information to do the study, so it was not done. It gave us some
ideas that it might be a threat to competition, but it did not do the review
because it did not have the numbers or capacity to do it. So we set up the ERA
to do the review. It did not do it. People did complain. We asked Synergy and
the PUO to look into it. That is what we are doing. I will be quite clear; the
private sector is out there and has a system whereby it becomes reliant on
subsidies by the government—for the government to take the risk and it
to take the profit. These guys opposite might like that arrangement. That is
the system they set up, but we are going to ensure that there is real
competition out there. When the private sector comes on and takes market share and
sells electricity, it takes the market risk. We are not going to subsidise it.
That is what this issue is about. The Labor Party is looking for some
corporatist game whereby Synergy subsidises its mates in electricity. We are
not going to do it. But we will ensure that the system we set up works
effectively and that the private sector can get a wholesale price equivalent to
what Synergy's wholesale price section pays to the resale sector.
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