❓ Mr. Johnston questions the Minister for Energy regarding the ERA's report on the electricity market, specifically Synergy's dominance. The Minister dismisses the report as lacking data-driven evidence and criticizes its methodology.
AnsweredQoN 549Legislative Assembly
QuestionView source ↗
ELECTRICITY GENERATION
AND RETAIL CORPORATION — ECONOMIC REGULATION AUTHORITY REPORT
549. Mr W.J. JOHNSTON to the Minister for
Energy:
I refer to the ''2014 Report to the Minister on the
Effectiveness of the Electricity Generation and Retail Corporation Regulatory
Scheme'' of March 2015 by the Economic Regulation Authority.
(1) Does the minister agree with the ERA's
comments on page 7 that the conditions necessary for vigorous
competition do not exist in the WEM?
(2) Does the minister accept the ERA's
comments on page 8 that following the merger in 2014, Synergy has increased its
overall dominance in the market?
(3) Does the minister also agree with the ERA's
comments on page 9 of the report that the ERA considers that structural
separation of Synergy would be the best means to facilitate � competition and
private sector investment?
AND RETAIL CORPORATION — ECONOMIC REGULATION AUTHORITY REPORT
549. Mr W.J. JOHNSTON to the Minister for
Energy:
I refer to the ''2014 Report to the Minister on the
Effectiveness of the Electricity Generation and Retail Corporation Regulatory
Scheme'' of March 2015 by the Economic Regulation Authority.
(1) Does the minister agree with the ERA's
comments on page 7 that the conditions necessary for vigorous
competition do not exist in the WEM?
(2) Does the minister accept the ERA's
comments on page 8 that following the merger in 2014, Synergy has increased its
overall dominance in the market?
(3) Does the minister also agree with the ERA's
comments on page 9 of the report that the ERA considers that structural
separation of Synergy would be the best means to facilitate � competition and
private sector investment?
AnswerView source ↗
(1)–(3) I thank the member for the
question. Yes, that report was tabled today. The ERA, as part of the changes in
regulation following the merger, was required to report annually on a whole
range of instruments that were put in place at the time of the changes to limit
the monopoly power, or the market power, of the combined entity. This is
the first of the reports. The ERA indicated strongly in this report that it did
not have the data to make that measurement. It did not have the data to assess
whether it was or was not. I might add that � the report provides no evidence that there has been an enhancement or a
use of monopoly power or market power by Synergy. In fact, it was put to the
ERA that Synergy is losing market share in the contestable market. There are
two sides. Synergy has a basic monopoly among the small users but competes
widely with the private sector and the larger users. It dramatically lost
market share after the merger. In fact, its market share is down to slightly
over 30 per cent. The question is, if they did not have that day-to-day
assessment and if there is no illustration or data supporting the use of market
share, why the recommendation? It went out and talked to a range of market
participants. I am not surprised that market participants in this market set up
by Labor, whose whole business plan is to live off the state, complained. When
the Economic Regulation Authority does the next review, it will rely on data
rather than on interviews with private players, and if it shows there is a use
of the existence of market power and the use of market power, I will be
concerned. But right now, the ERA report—it cost $400 000, I might add—is
not a good report; it did not do what it was supposed to do.
Mr
B.S. Wyatt : Because it was embarrassing to you, that is why.
Dr
M.D. NAHAN : The ERA's report is an embarrassment on the part of the
ERA; yes.
question. Yes, that report was tabled today. The ERA, as part of the changes in
regulation following the merger, was required to report annually on a whole
range of instruments that were put in place at the time of the changes to limit
the monopoly power, or the market power, of the combined entity. This is
the first of the reports. The ERA indicated strongly in this report that it did
not have the data to make that measurement. It did not have the data to assess
whether it was or was not. I might add that � the report provides no evidence that there has been an enhancement or a
use of monopoly power or market power by Synergy. In fact, it was put to the
ERA that Synergy is losing market share in the contestable market. There are
two sides. Synergy has a basic monopoly among the small users but competes
widely with the private sector and the larger users. It dramatically lost
market share after the merger. In fact, its market share is down to slightly
over 30 per cent. The question is, if they did not have that day-to-day
assessment and if there is no illustration or data supporting the use of market
share, why the recommendation? It went out and talked to a range of market
participants. I am not surprised that market participants in this market set up
by Labor, whose whole business plan is to live off the state, complained. When
the Economic Regulation Authority does the next review, it will rely on data
rather than on interviews with private players, and if it shows there is a use
of the existence of market power and the use of market power, I will be
concerned. But right now, the ERA report—it cost $400 000, I might add—is
not a good report; it did not do what it was supposed to do.
Mr
B.S. Wyatt : Because it was embarrassing to you, that is why.
Dr
M.D. NAHAN : The ERA's report is an embarrassment on the part of the
ERA; yes.
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