Interim ACCC approval for electricity buying group

A proposal to allow major electricity users to collectively negotiate long-term supply contracts in South Australia has taken a step forward, with the Australian Competition and Consumer Commission (ACCC) granting interim authorisation and draft determination.

This will allow the Buying Group to explore potential options to avoid the high prices and uncertainty that are threatening the viability of many businesses.

South Australian Chamber of Mines and Energy (SACOME) chief executive officer Rebecca Knol welcomed the ACCC decision.

“We were confident because it is a sensible and workable concept, but it is great to officially get the tick of approval,” she said.

“It means we can now go out and talk to electricity suppliers about options to take the pressure off some of the most important businesses in this state.

“As energy costs represent between 10 per cent and 40 per cent of their total costs, the increasing cost of electricity impacts on their operations and on their investment decisions.”

The original Buying Group included Nyrstar, Arrium, OZ Minerals, Hillgrove Resources, Rex Minerals, Seeley International, SMR Automotive, Thomas Foods and Intercast & Forge.

Since the application was made in January 2017, Peregrine Corporation, Foodland, Independent Grocers of Australia (IGA), Pernod Ricard Winemakers, Orora Glass, Brickworks, Flinders University and the University of South Australia have also come on board.

Ms Knol said South Australia had the most volatile and expensive wholesale electricity prices in Australia and long-term contracts currently were not available.

Companies were receiving individual contract prices that were “at a premium” and 30-80 per cent higher than previous rates.

“By aggregating their load, they will improve their individual bargaining position and be able to establish more cost-competitive supply contracts,” she said.

The application seeks authorisation for 11 years – sufficient time to allow national and state energy and climate change policies to align and enable the operation of an effective and efficient National Electricity Market.

The next step is to seek full authorisation from the ACCC, which would allow SACOME to proceed with contractual agreements with suppliers.

A final decision is expected to be announced in June.

April 19, 2017

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