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Bernard Keane

Less competition for a faster transition? The ACCC’s deal from hell

One of the criticisms of the Australian Competition and Consumer Commission’s call for greater competition powers — a call endorsed most vocally by former ACCC head Rod Sims — is that it already has enough powers, and doesn’t use them.

It’s a criticism that might have a little more substance after the regulator’s decision to approve the purchase of Origin Energy by Brookfield and MidOcean.

The ACCC decided that Brookfield’s purchase of Origin’s energy markets business — MidOcean will keep Origin’s gas production business — would be a substantial lessening of competition, the threshold test under competition law. That’s because Brookfield owns nearly half of Ausnet, which dominates electricity transmission in Victoria, as well as a gas distribution business and a smart meter business.

Normally that would mean the ACCC would reject the acquisition, but the substantial lessening of competition test comes with a caveat that an acquisition can be approved if would result in a public benefit greater than the detriment to the public from the lessening of competition. And that’s what the ACCC has decided, because Brookfield’s acquisition of Origin would lead to “an acceleration of renewable generation and storage development for Origin Energy Markets, additional renewable generation and storage development for Origin Energy Markets; and a decrease in Origin Energy Markets’ emission intensity”.

“The ACCC also considers that the proposed acquisition would result, or be likely to result in, an acceleration of renewable generation and storage build-out in Australia, and that this constitutes a public benefit.”

The ACCC is putting a lot of hope in Brookfield’s renewables investment plan. To be fair, there’s some basis for that hope. As the ACCC says, the relevant Brookfield fund that would own Origin is a committed renewables fund that has been marketed to investors on that basis. Failure to follow through with the accelerated transition would be highly damaging to Brookfield’s ability to attract future funds.

The ACCC considers that the nature of the Brookfield Global Transition Fund and Brookfield’s financial, reputational and commercial incentives, in combination with its global renewables expertise and procurement scale advantage, will enable it to increase the speed of the build-out, and favour a completed build-out.

And, yes, it’s noteworthy that this is the first time that the ACCC has determined that an expedited renewables rollout would be sufficient public benefit to justify approving a transaction that lessened competition. But it positions consumers, competitors and business customers of Origin as the potential victims of yet another concentrated market in Australia, of which we already have too many.

Competition, or its dearth, is the biggest problem in the Australian economy, as the staggering extent of greedflation over the past two years has demonstrated, whatever fantasies the Reserve Bank might tell itself.

In effect, the ACCC is telling customers and competitors they have to pay the price for our lost decade on climate policy, that the decade in which the Coalition governed and sat on its hands on climate and the need for the decarbonisation of our energy system must continue to inflict damage despite Labor’s efforts to expedite the transition. They’ll also have to pay the price for the rampant NIMBYism, parochialism and red tape that is plaguing efforts to roll out transmission infrastructure to facilitate a more decentralised renewables and storage grid.

In effect it’s the ACCC saying to governments: “You’re botching this, so we need to artificially encourage the private sector to increase investment.” That’s a big call — and a potentially costly one — when Victorians in, say, 2027 get their power bills. And once the renewable rollout is completed over the course of the next decade, we’ll still be left with a concentrated energy market. There’s no evidence that an oligopoly in renewable energy won’t be just as gouging as one using coal or gas to produce power.

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