Bill shock for providers

Company shares belted by energy review

SHARES in Australia’s two biggest electricity companies have plunged after the competition regulator proposed the biggest shake-up of the power sector in two decades.

AGL Energy felt the wrath of the market yesterday, its share price slumping 6.95 per cent to $21.17.

Shares in rival Origin Energy also fell heavily – albeit more modestly – ending the session 3.57 per cent weaker at $9.73.

Proposals to break up the energy heavyweights’ stranglehold on the generation of electricity and introduce default retail prices have heightened concerns the industry could be hit with re-regulation.

State and the federal governments are under immense pressure to reduce power bills for consumers and large users, in particular manufacturers.

Canberra is now weighing its support for the 56 recommendations made by the Australian Competition and Consumer Commission yesterday.

Potential for market intervention has raised fears investors in the two power companies and Hong Kong-controlled EnergyAustralia face heightened sovereign risk profiles.

“Proposals must not unintentionally undermine the commercial functioning of the wholesale market, which can put taxpayer funds at risk and deter future private investment,” said the Australian Energy Council, which lobbies government on behalf of the three big power players.

In a statement, it called for the government to consult with industry on the regulator’s recommendations “to avoid any unintended consequences, especially on those recommendations that involve market interventions”.

The Australian Industry Group, which has manufacturers among its members, said the ACCC report made a “huge contribution” to the debate around energy prices.

Ai Group chief Innes Willox said the commission had offered “many tools to help get electricity prices down and our first impression is a positive one”.

The ACCC’s report calls for the Federal Government to underwrite low, fixed-priced electricity contracts at $45 to $50 a megawatt hour for the latter stages of new power plants to make it easier for developers to secure debt financing.

Such intervention would encourage new entrants, it said.