Gupta opposes power market reform

Energy provider Simec will oppose new rules expanding the options for big power users to directly sell electricity into the wholesale market.

Billionaire Sanjeev Gupta’s Simec Energy will oppose new rules expanding the options for big power users to directly sell electricity into the wholesale market, amid concerns the move will raise costs and add unnecessary regulation.

A move to open up a demand-re­sponse mechanism to the ­whole­sale market has been proposed to allow large consumers of power to receive a financial benefit from cutting their own use when dem­and and wholesale prices are high, sending surplus energy back to the east coast’s electricity network. If a draft rule by the electricity rule-maker proceeds, it will also likely bring into the market a raft of new demand aggregators, who may look to bring together a club of big power users and bid their combined capacity into the power system.

Simec Energy — the power retailer to big users including the South Australian government — will today tell a public hearing of the Australian Energy Market Commission that, while it supports demand response, it is opposed to the proposed rule change.

“Fundamentally, Simec considers that pushing this market reform on top of market participants already active in this space could impede efficient market development and diminish efficient market outcomes,” Simec chief exe­cutive Marc Barrington will tell the AEMC. “I am a firm believer that the free operation of markets — and ensuing competition — will deliver the best outcomes for end-use customers and not additional regulation.”

Simec will tell the AEMC that the planned rule change is unlikely to deliver significant dem­and-response scale from cust­omers and will incur significant tr­an­saction and administrative costs.

Issues limiting participation include access to back-up generation assets, sophistication of their own energy-management practices and not all customers having demand peaks corresponding to market peaks.

“From our perspective, these customer issues are largely insurmountable. That is, they exist regardless of any measure or scheme,” Mr Barrington will say.

“I genuinely consider that by allowing the market to work, with retailers such as ourselves actively prosecuting demand response, coupled with changing technology, we will get increased demand response participation without additional regulation.”

The big power companies have raised issues with the rule change partly due to concerns about the added complexity such a move would bring to a power grid undergoing immense structural change and the prospect of a new regulatory body running the mechanism.

The Australian Energy Council, which represents the nation’s large power retailers, said the industry supported demand res­ponse but challenges remained in ensuring lowest costs to the market and consumers.

However, ACCC chairman Rod Sims has said this is more a reflection of big retailers wanting to keep a new competitor out of the market than any desire to look at developing the demand-response market. The ACCC, in last year’s power price inquiry, said retailers were not employing demand response “at an efficient level” and described the AEMC’s steps towards the mechanism as a vital development in reforming the national electricity market.

Mr Barrington concedes the market has moved slowly but says it is investing and working with its customers to boost the offering.

“Historically, retailers have found it difficult to find cost-effective ways to develop an economic demand-response solution where there is enough value to the retailer and customer to warrant investment ... to deliver an effective demand-response capability,” he will tell the AEMC.

“However, emerging technologies are now enabling this.”