ERM Power Lodges Submission to the National Energy Guarantee
ERM commends the ESB for embedding competition imperatives in the Guarantee. These cannot be compromised.
Guarantee must not diminish competition or entrench the power of large energy incumbents.
ERM Power’s final submission on the National Energy Guarantee supports key design elements which foster competition and market liquidity for the benefit of consumers while noting areas that require more consideration.
ERM Power CEO Jon Stretch said impressive progress has been made in designing the Guarantee in a highly consultative process which is a huge step in bringing together energy and climate policy and delivering more certainty for investment in energy infrastructure in the transition to renewables.
“The design paper (15 June) acknowledges how critical it is to foster competition and deliver reliability and affordability outcomes for energy consumers. This is reinforced by the ACCC Report on electricity retailing (11 July),” he said.
“At least 70% of generation in any State is controlled by a couple of large entities. The Guarantee and energy policy must not further entrench the power of vertically integrated gentailers and those with market power in generation.
“That means ensuring deep and liquid markets, transparency, and access to reliability and emissions products for all big energy users and retailers who will hold obligations under the Guarantee.
“We need to ensure generators don’t withhold supply particularly during tight demand and supply periods.
“Consultation in the coming weeks must not lead to undesirable compromises and poorer outcomes for competition and consumers. We implore the ESB and the Government to keep competition top of mind. It cannot be allowed to be traded away as an eleventh-hour compromise.”
Mr Stretch said there were essential aspects of the Guarantee that would help ensure this policy provides the best result for consumers over the long term.
“There is still work to do to iron out the technical practicalities of the Guarantee. We remain confident that these can be addressed and that the Guarantee can be an enduring energy policy mechanism for consumers and the energy sector. However, should last minute concessions be made that entrench the power of those who control generation such as vertically integrated gentailers, then the Guarantee will have failed to delivered a viable energy policy,” he said.
ERM Power is supportive of the following design elements:
- A Market Liquidity Obligation for large vertically-integrated gentailers with a narrow bid-offer spread that supports wide access to qualifying contracts during the lead up to a reliability gap. This recognises the importance of financial markets and liquidity for competition and price in the electricity sector;
- A targeted reliability gap to ensure the right infrastructure in the right places at lowest cost, based on targets;
- A trigger period beginning a minimum three years before a projected reliability gap to allow the market time to respond; and
- The ability to adjust contract positions within the T-1 period (i.e. one year from a reliability gap) in recognition that retailer’s load shifts and customer’s operations flex, impacting load and the consequent contracting obligations.
ERM Power’s submission, detailing recommendations, is available here
About ERM Power
ERM Power is an Australian energy company operating electricity sales, generation and energy solutions businesses. The Company has grown to become the second largest electricity provider to commercial businesses and industrials in Australia by loadsuper1, and is the only energy retailer licensed to sell electricity in all Australian states as well as the Northern Territory and the Australian Capital Territory. A growing range of energy solutions products and services are being delivered, including lighting and energy efficiency software and data analytics, to the Company’s existing and new customer base. ERM Power also sells electricity in several markets in the United States. The Company operates 662 megawatts of low emission, gas-fired peaking power stations in Western Australia and Queensland. www.ermpower.com.au
1 Based on ERM Power analysis of latest published information