The Australian Competition and Consumer Commission (ACCC) has released a statement outlining its concerns with AGL’s bid for Macquarie Generation in New South Wales, stating that the acquisition could substantially lessen competition in the market. The announcement came as the sale process for the State’s remaining Delta Electricity power stations at Vales Point and Colongra progressed this week with the closing of Expressions of Interest (EOI).
The decision on AGL’s bid was originally due on 23 January ahead of the 28 January bid deadline, but was postponed after AGL adjusted its submission.
In releasing the Statement of Issues this week, ACCC Chairman Rod Sims outlined the ACCC’s preliminary view, explaining that the proposed acquisition is “likely to result in a substantial
lessening of competition in the market for the retail supply of electricity in New South Wales as a result of reduced access to competitively priced and customised hedge contracts”.
The ACCC’s concern relates to the removal of one of the largest sources of independent generating capacity in New South Wales, noting that if AGL’s bid were to be successful, 70-80 per cent of generating capacity and over 85 per cent of the retail market in the State would be controlled by the three major retailers AGL, Origin Energy, and Energy Australia.
“Our concern is that second tier and new entrant retailers might find it difficult to gain the hedge contracts they need to compete aggressively in the New South Wales retail market,” Mr Sims said.
The ACCC has called for further submissions from the market in response to the Statement of Issues by 17 February 2014. As a result, the ACCC’s final decision will be deferred until 4 March 2014.
The deadline for bids for Macquarie Generation comes a day after EOIs were due for the Governments remaining Delta Electricity plants at Vales Point and Colongra.
Delta’s Vales Point plant has a base load capacity of 1,320 MW, representing 8.3 per cent of the State’s total generating capacity. It is a coal-fired power station located at the southern end of Lake Macquarie.
Colongra is a gas-fired power station with a generating capacity of 667 MW. Located close to Lake Munmorah, the plant is newly built and operates as a peaking generator. Vales Point has long-term coal contracts in place while Colongra has firm gas transmission rights to meet demand.