UntitledECON309 Research Assignment Industry regulators such as the Australian Competition and...

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UntitledECON309 Research Assignment Industry regulators such as the Australian Competition and Consumer Commission (ACCC) outinely monitor a variety of industries to assess competition and market efficiency in the interest of consumers. A recent market study by the ACCC relates to Australian electricity markets (see https:www.accc.gov.auegulated-infrastructure/energy/electricity-supply-prices-inquiry). Each student is required to complete a research report of 1,000 words (including references) on the following: Discuss the reasons for Australia’s high electricity prices. Discuss previous electricity policy approaches and possible future policy approaches. From an economic perspective, what are the implications of high electricity prices and policy responses in terms of efficiency and equity?Other possible references include: Nelson, T, Bashir, S, McCracken-Hewson, E, Pierce, M XXXXXXXXXXThe changing nature of the Australian electricity industry. Economic Papers XXXXXXXXXX. Nelson, T, McCracken-Hewson, E, Whish-Wilson, P, Bashir, S XXXXXXXXXXPrice dispersion in Australian retail electricity markets. Energy Economics 70, XXXXXXXXXX. Simshauser, P XXXXXXXXXXPrice discrimination and the modes of failure in deregulated retail electricity markets. Energy Economics 75, 54-70. https:www.energymadeeasy.gov.au/publications. See, for example, “About energy bills”.Please submit your report through Turnitin on iLearn before 2pm on June 4. See the Unit guide for other details. https:www.energymadeeasy.gov.au/publications

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Electricity Prices in Australia
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Electricity Prices in Australia		[Type the document subtitle]		[Pick the date]		HP	
Analysis of Electricity Price in Australia
Electricity prices in Australia have increased sharply in the recent period in the past. It is even giving the clues that it would increase further in the near future with no sigh of relief to the consumers. The causes for such an increase have been many consistently working on and with each other, but, these reasons are different for each state and each territory. It is the joint responsibility of the Australian and state and territory government to regulate the prices but the Australian Government can only influence the prices to some extent the action lies in the hands of state and territory government.
Price Increase Trend:
The electricity prices for households have increased at an average of 72% in the 10 years to June 2013 and for the manufacturing business, the same has been 60%. The pattern of the increase in the prices has been different for different states and territories. The rate of price increase for electricity has been 30% in Perth, 41% in Adelaide, 73% in Brisbane and 107% in Sydney. 
Underground factors that led to price increase:
The electricity bill in Australia consists of three major components:
1. Wholesale costs: This includes the cost of generation of electricity
2. Network Charges: This includes charges for reliable and efficient delivery.
3. Retail Margin: This includes the payment for meter reading and other allied services.
The electricity bill also includes an additional component based on the environmental programs for Australian and state and territory government. These components are generally based on the programs aimed at protecting the environment such as increasing the use of renewable electricity generation. But the share of this component varies across different types of customers and jurisdiction. The point to be noted here is that the wholesale costs and network charges account of about 66% of the finally generated bill.
The cost to retails suppliers includes the cost of maintenance and up gradation of the network of supply under the nationally agreed rules by a single commonwealth regulator. On the other hand, the cost of wholesale supply is connected across a few of the states and territory boundaries and for which the state and the local factor forms an important determinant of wholesale price supply.
In the recent past period, the major increment in the price of electricity is because there is a need to invest in the networking component. This is because of the reason there has been underinvestment in the area of network maintenance and to increase the capacity. Another reason that was noted for the incremental bill was because of the new environmentally friendly policies initiated. The minor increase in the price of electricity can be majorly attributed to the recent changes adopted in the regulatory measure of transmission and distribution networks and also increased competitiveness in the wholesale market of electricity because of the falling demands. These may be because of the offset in some jurisdiction and removing some of the state and territory governments that have tried to keep the electricity prices artificially low.
Future Expectation:
The inflation in the electricity supply is expected to be more or less moderate over the next few years. To be more precise, the price of electricity supply to the houses expects an average increase of 3% over the next few years. But to mention further the price increase outcomes may vary across the jurisdiction from an incremented high of 16% in the northern territory and a fall of 1% when it comes to the areas of South Australia.
Policy recommendation to check the rising prices:
1. Proposal to privatize some of the electricity networks that are owned by the state government.
2. Trying to adjust to the environmental policies that can have an impact on the energy cost of the wholesale electricity supply
3. Adhering to deregulation of retail pricing
4. Trying to set up reliability standards as per the value that the customer has for network reliability.
The recommendation is given by the Australian Competition and Consumer Commission:
1. They have recommended the abolition of the current retails offers which are apparently different between the retailers and to introduce a new offer which is same across all the retailers and also the price to be set up by the Australian Energy Regulator.
2. Once the price is determined by the Australian Energy Regulator, the consumers should be allowed to compare the pricing. Also, conditional discounts like on-time payment discounts should be removed from the system.
3. A compulsory code for the website should be introduced so as to ensure that the offers are based on the benefit of the consumer and not on the basis of paid commissions.
4. There should be a voluntary drive to write down the networks of overinvestment including the territories of NSW, Queensland, and Tasmania. 
5. Restructuring of Queensland generators into three separately owned portfolios to improve competition.
6. There should be a limit on the companies with a market share of more than 20 percent and should not be allowed to acquire more generation capacity.
7. Giving more power to the Australian Electricity Regulator for investigation and addressing of the market problems.
References:
Australian Energy Regulator, State of the energy market 2012, Australian Competition and Consumer Commission, Canberra, 2012.
Nelson, T, Bashir, S, McCracken-Hewson, E, Pierce, M (2017). The changing nature of the Australian electricity industry. Economic Papers 36(2) 104-120
Productivity Commission (PC), Electricity networks regulatory frameworks, Inquiry report no. 62, PC, Melbourne, 9 April 2013.
Simshauser, P (2018) Price discrimination and the modes of failure in deregulated retail electricity markets. Energy Economics 75, 54-70.

Untitled ECON309 Research Assignment Industry regulators such as the Australian Competition and Consumer Commission (ACCC) routinely monitor a variety of industries to assess competition and market...

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