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Piper Alderman’s response to the Minister, Stanwell and CS Energy comments in the relation to the QLD Energy Class Action

23/07/2020

Greg Whyte, partner of Piper Alderman, the law firm conducting the Qld Energy Class Action has hit back at the comments made by Stanwell, CS Energy and Dr Anthony Lynham as reported by The Observer yesterday.

Mr Whyte responded to Stanwell’s assertion that the Australian Energy Regulator (AER) has given it a clean bill of health over price spikes in the wholesale market saying:

“That is simply not true. In its 2018 report on the wholesale electricity market, the AER stated that Stanwell and CS Energy ‘can exercise market power due to their dominant market position’ and that ‘over the past five years rebidding resulted in price spikes and volatility.’ The rebidding described by the AER is the unlawful gaming we are accusing Stanwell and CS Energy of engaging in.”

To the comment by Stanwell saying high prices were caused by high temperatures, Mr Whyte noted:

“That is remarkable because the evidence shows they typically deploy these strategies on days of high temperatures and high demand. The AER has reported on this too. In its 2015 report on the market, the AER said ‘From November 2014, generators including Stanwell, CS Energy and Callide periodically rebid large volumes of capacity from low to very high prices late in a trading interval. The strategy was typically used on days of high temperatures and high energy demand, and often when import capability on transmission interconnectors was limited.’ That means they flexed their muscles when there was no possibility of competition from interstate because the transmission lines were congested.”

Directing his response to CS Energy, he said:

“While CS Energy state they have bid within the rules of the market, those rules require them to comply with the competition laws of this country. Whatever the market rules might be, they can’t use their market power to flout the laws of the land to make extraordinary profits at the hands of Queensland businesses and consumers. CS Energy’s return on equity in 2017 was 58.9%.”

In response to the position taken by Energy Minister, Dr Anthony Lynham, noting that the government had directed Stanwell in 2017 to alter its bidding strategies, Mr Whyte said:

“Isn’t it a remarkable thing that the government has to invoke emergency powers under the Electricity Act to direct one of its generators to alter its bidding practices? Why would it have to do that unless something was very, very wrong? And why on earth wasn’t it done in 2013, when the South Australian government petitioned the Australian Energy Market Commission to change the market bidding rules to stop this behaviour? Or in 2016 when the Queensland Productivity Commission recommended the government require CS Energy and Stanwell to enter into a voluntary code of conduct restrain their bidding practices – a recommendation the government rejected? And why on earth did they revoke that direction in 2019?”

Mr Whyte continued saying:

“Even more surprising is Dr Lynham’s comment that the State Government was following the ACCC’s recommendation when it established CleanCo. That is just not right. The ACCC recommended the Government divide its existing generation assets into three generation portfolios of a similar size and mix of generation technologies. CleanCo has one gas generator and the rest are small hydro units. It’s stated plan is to develop renewable generation capacity. It has none of the coal fired assets of Stanwell or CS Energy and at present it is only about a quarter of the size of each of Stanwell and CS Energy. It cannot possibly compete with them. The ACCC has said that ‘a renewable-only portfolio is unlikely to offer the same level of competitive constraint in the market due to the way renewable generation is typically bid into the market’.”