The Australian Energy Market Commission (AEMC) today published the Second Draft Report of its Review of the Effectiveness of Competition in Electricity and Gas Retail Markets in South Australia, advising on ways to remove retail price regulation in the State.

AEMC Chairman, Dr John Tamblyn, said the Commission’s Second Draft Report was prepared following the Commission’s finding in September 2008 that competition is effective in electricity and gas retailing.

“South Australia requires a flexible and efficient policy approach to retail pricing in the face of changing economic and market conditions – input costs are increasing, the balance between energy supply and demand is tightening and there is evident need for new investment in network and generation capacity,” Dr Tamblyn said. “Policy responses to climate change risk will also have a significant impact on energy market costs and performance.”

Dr Tamblyn said the South Australian review has established that effective competition is keeping prices in line with the costs of supply.

“Combined with a strong consumer protection framework, this evidence provides a sound basis for phasing out price regulation while continuing to protect the interests of energy consumers,” he said.

“The Commission recommends replacing price regulation with a transparent price monitoring regime, accompanied by the capacity to re-regulate prices if competition deteriorates substantially.”

The Report concludes that the combination of competitive pricing, transparent price monitoring, the threat of price re-regulation if warranted, and the established consumer protection arrangements would represent a more effective and flexible oversight regime for the emerging energy market challenges.

The AEMC is now seeking submissions on all aspects of the report’s draft recommendations in relation to the phasing out of retail price regulation. Stakeholders and interested parties are invited to attend a public forum in Adelaide on 7 November 2008 at which the Commission will present its draft recommendations detailed in this report.

For information contact AEMC:
AEMC Chairman, John Tamblyn 02 8296 7800
AEMC Communication Manager, Prue Anderson 02 8296 7800 or 0404 821 935