Market Review: Completed
The AEMC has released its final report for the fourth annual review of retail energy competition in the national electricity market (NEM). The 2017 review considered how competition is evolving with a view to comment on the current state and future development of retail competition across the NEM. To consider the overall effectiveness of competition in retail energy markets, the review applies a range of market measures and indicators against a structure-conduct-performance framework.
Based on the assessment of the key measures and indicators considered for the review, there have been changes to the nature of retail competition and the outcomes for consumers.
Overall, there are opportunities and challenges to enhancing the effectiveness of retail competition which are due to:
- changing consumer preferences
- growing diversity of products and services
- market structure, retail pricing and margins
- upward pressure on retail prices due to influences external to the retail energy market.
A particular improvement in the retail energy market has been the emergence of the new retail energy businesses and new energy service providers. These are offering innovative product and services to electricity consumers. Given this emergence, governments and policy makers must consider that poorly designed interventions that either directly or indirectly affect the retail market, could stifle this emerging innovation, limiting their benefits to consumers. Poorly conceived direct and indirect policy interventions of the past that affect retail market outcomes must be avoided, such as:
- the price re-regulation in the UK, which restricted price discrimination, but ultimately resulted in less choice and higher retail prices for consumers
- the design of the LRET scheme, which has limited the ability of the new retail businesses to access hedge contracts on a cost-effective basis.