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Category: Electricity Energy and Utilities / Energy / Government and Politics / States and Territories

SA companies make bid to form bargaining group for electricity contracts

Tuesday, 21 Feb 2017 05:25:19

Two interconnectors top up South Australia's power supply. (Supplied)

A group of South Australia's biggest electricity users are hoping to be allowed to band together in a bid to negotiate favourable long-term electricity contracts.

The "buying group" includes Whyalla steelworks owner Arrium, Hillgrove Resources, Rex Minerals, Seeley, SMR Automotive, Thomas Foods and Central Irrigation Trust, which collectively use about 10 per cent of the state's electricity consumption.

The South Australian Chamber of Mines and Energy (SACOME) is facilitating an application to the Australian Competition and Consumer Commission (ACCC) to seek approval to begin talks on behalf of the group for 11-year contracts.

Power price fluctuations during peak demand times have hit South Australian companies hard.

The state relies on power from renewable and non-renewable sources, including natural gas. During times of high demand it also uses electricity from the Murraylink and Heywood interconnectors which import power from the eastern states.

Power companies in South Australia have also chosen not to run at capacity, citing unprofitability.

Volatile prices hit companies

SACOME chief executive Rebecca Knol said the companies' energy bills were between 10 per cent and 40 per cent of their total costs and the rising cost of electricity was impacting their operations and investment decisions.

"The companies span the mining, agricultural, food and manufacturing sectors and all are operating in globally competitive markets and need supply certainty and competitive prices to remain successful," Ms Knol said.

She said South Australia had the most volatile and expensive wholesale electricity prices in the country.

The companies are currently receiving individual contract prices that are "at a premium" and 30–80 per cent higher than previous rates, she said.

The ACCC is expected to release a draft determination in April in regards to the application which is checking the plan does not contravene anti-competitive provisions in the Competition and Consumer Act.

South Australian Energy Minister Tom Koutsantonis said the Government supported the proposal but was worried it would be blocked by the ACCC.

"Under the current rules of the national electricity market and ACCC, large industrial customers aren't allowed to pull together," Mr Koutsantonis said.

"I think this is a sign that the national electricity market has further broken, not serving the people of South Australia."

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