Benefits of Fully Contestable Markets

Presentation to the WA Power and Gas Conference Jeff Dimery CEO

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Overview

1.  What are the benefits of Full Retail Contestability (“FRC”)?

2.  What needs to be done before we can introduce FRC in the WA electricity market?

3.  How do we transition to FRC so customers can enjoy the benefits?

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Benefits of FRC

Biggest benefit for customers is

CHOICE!

Choice of retailer

•  If we set the market up right, new retailers will enter

•  In Victoria the number of active electricity retail companies has tripled since FRC was introduced

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Choice of products

•  Retail competition drives:

•  Product innovation •  Quality service •  Efficient pricing

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Alinta’s East Coast Campaign

•  15% ‘pay on time’ discount off usage

•  No lock-in contract and no exit fees

•  Integrated marketing campaign: •  TV commercials •  Online •  Trams

•  Product and campaign has been successful

•  Alinta has over 135,000 customer accounts in Victoria and South Australia

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What do we need before FRC?

1.  Unsubsidised tariffs which reflect costs

2.  Systems to allow customers to switch

3.  Stabilise policy environment and review regulatory framework to ensure it’s appropriate for FRC environment

If you get the above right – retailers and customers will participate

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Efficient tariffs are key

•  Current residential tariffs are subsidised and don’t reflect costs

•  Without cost reflectivity retailers won’t participate in the market

•  This needs to be addressed before FRC is implemented

•  To ensure tariffs remain cost reflective, independent price regulation and ultimately price deregulation is required

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Investment in systems

•  Current market can handle about 20 customers switching a day

•  Post FRC it needs to churn thousands of customers each day

•  Need to invest in business-to-business systems between network / retailers / market operator to ensure FRC can work

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Policy and regulatory certainty is needed

•  Policy certainty and competitive neutrality important

•  Independent tariff regulation

•  Regulatory framework should be reviewed to determine whether changes are needed for FRC

•  Revise legislation which may reflect a single (government owned) residential retailer

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How do we get there?

1.  Develop a plan to achieve cost reflectivity

2.  Identify the IT system enhancements required and build it

3.  Stabilise the policy environment and review the regulatory framework and start on any required changes

Once the above is complete FRC can be introduced and it will result in benefits to electricity customers