Watchdog blocks AGL buyout of Macquarie Generation

Power row: The ACCC is concerned about industry consolidation. Photo: Peter Stoop
Power row: The ACCC is concerned about industry consolidation. Photo: Peter Stoop

There would be ''significant detriment'' if AGL's proposed purchase of the country's largest power generator, Macquarie Generation, proceeds while public benefits would be ''small'', competition watchdog, the ACCC has warned.

The Australian Consumer and Competition Commission has blocked the $1.5 billion acquisition, with the Australian Competition Tribunal now to decide whether it should proceed.

''The public benefits that are likely to result from the proposed acquisition are small,'' the ACCC said in its submission to the tribunal. ''The benefits … would largely accrue to AGL and are extremely unlikely to be shared with the broader community.''

AGL is one of the country's largest power generators and retailers, and its position would be strengthened by the acquisition. ''There is little likelihood that any of the efficiencies AGL will likely achieve from vertical integration will result, or are likely to result, in lower wholesale or retail electricity prices,'' the ACCC told the tribunal.

''Rather, the increase in vertical integration will, or is likely to, reduce competitive rivalry in the NSW retail electricity market enabling AGL to retain any benefits it is likely to achieve.''

The ACCC warned that if AGL was allowed to acquire Macquarie Generation, the result would be a ''step change'' to the industry consolidation of recent years.

The NSW government reached an agreement to sell Macquarie Generation to AGL for $1.5 billion earlier this year, which the ACCC has blocked.

AGL, Origin and EnergyAustralia increasingly dominate the retail supply of electricity in NSW and in the national electricity market, the ACCC said, ''and are increasingly becoming vertically integrated'' as the market become more consolidated.

''The proposed acquisition is a significant step change in this pattern of consolidation that cannot be reversed,'' it said.

''Macquarie Generation is the largest generator in the largest region of the [national electricity market]. Its future is a critical determinant of the level of future competition and the height of barriers to entry in NSW, and the [national electricity market] more broadly.''

The three supply more than 96 per cent of small retail electricity customers in NSW and about 70 per cent of the national electricity market, the ACCC said.

Allowing AGL to buy Macquarie Generation would result in Origin Energy, AGL and EnergyAustralia controlling 80 per cent of electricity generated in NSW and 40 per cent of capacity in the national electricity market.

Earlier, consumer lobby group Choice warned that if AGL was allowed to buy Macquarie Generation, households would lose out.

This story Watchdog blocks AGL buyout of Macquarie Generation first appeared on The Sydney Morning Herald.