ACCC proposes to grant authorisation to SA businesses for the joint purchase of electricity

The Australian Competition and Consumer Commission (ACCC) has issued a draft determination proposing to allow the South Australian Chamber of Mines and Energy, along with 24 other South Australian businesses, to establish a joint electricity purchasing group. The ACCC proposes to grant authorisation for 11 years.

The ACCC has also granted interim authorisation to allow the parties to commence a joint tender for the supply of electricity immediately.

The joint buying group wants to secure reliable electricity supply arrangements for its members at competitive prices. Between them the group accounts for around 15 per cent of electricity demand in South Australia.

"While the outcome of the tender process is uncertain, the proposed conduct, by offering a guaranteed reasonably sized load for up to ten years, has a real chance of changing the wholesale market dynamics, where it allows existing participants to use existing plant more efficiently, or allowing new entry of electricity generation into South Australia. This could bring the benefits of increased competition in the wholesale market for electricity," ACCC Chairman Rod Sims said.

"Given the high levels of concentration on the supply side of the market in South Australia, the tender may provide further competition benefits by combining demand and increasing the participants' bargaining power in the retail supply of energy contracts", Mr Sims said.

The ACCC also considered the transaction cost savings likely to result from the tender provided a further source of public benefit.

"The ACCC considers there will be minimal public detriment from the proposed conduct, given that the group accounts for a relatively small proportion of total market demand", Mr Sims said.

The ACCC is seeking submissions on its draft determination before making a final decision, which is expected in June 2017.

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