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July 12, 2018
Brattle Experts' Report on Retail Electricity Market Design Used by ACCC in Electricity Pricing Report

The Brattle Group was recently commissioned to write a paper on retail electric markets for the Australian Competition & Consumer Commission (ACCC). Brattle’s report discussed policy options for protecting customers and promoting retail competition that have been successfully implemented by other jurisdictions around the world.

In its October 2017 preliminary report, the ACCC questioned whether Australia’s National Electricity Market was working in the best interests of consumers and sought to identify and address the causes of high electricity prices across its supply chain. Subsequently, the ACCC engaged The Brattle Group to prepare an independent report on the international policy landscape in retail electricity markets, using our extensive energy and regulatory expertise in Australia, North America and Europe.

The Brattle report written by Agustin J. Ros, Toby Brown, Neil Lessem, Serena Hesmondhalgh, James D. Reitzes, and Haruna Fujita addressed two fundamental questions posed by the ACCC’s inquiry: “How to ensure that all consumers are reaping the benefits of competition in relation to price and/or service offerings?” And, “How to ensure that essential services are offered to vulnerable consumers within an overall competitive retail market framework?”

Brattle consultants looked at ten jurisdictions around the globe and how each handled policies to promote retail competition, general policies to protect customers, and targeted policies for protecting the interests of vulnerable customers. In each jurisdiction the report reflects the trade-offs that policy makers need to make as they balance the market-wide benefits of increasing competition (lower overall prices, innovation) with the impacts that competition may have on specific customer groups who may face higher prices and/or higher risks, due to the unequal distribution of the benefits of competition. In particular, the report shows a trade-off between the availability of regulated prices and wide customer participation in the competitive retail market. The report suggests that if retail prices are to be regulated, then steps should be taken to limit the number and type of customers eligible for the regulated price, so as to maintain the benefits of a competitive market for the majority of customers.

The Brattle report further highlights the benefits of multi-party access to electricity consumption data to reduce switching costs and promote competition, marketing campaigns to promote official price comparison websites, and steps to increase the visibility of the market to passive customers.

The ACCC’s final report with recommendations on how to improve affordable electric rates for Australian consumers and businesses was published today. The report indicates that if Australians follow the recommendations within, they should see a 20% to 25% savings on their electric bill per year.