Competition Boss Rod Sims Assessment Answer

Business Economics Assignment

Discuss the following news story in the 

Australian

 on this thread by referring to the following from the course:

• - Importance of Competition for Efficiency

• - Characteristics Required for an Industry to be Considered Perfectly Competitive

Competition boss Rod Sims has accused electricity retailers of keeping the market “opaque’ to hold prices higher than they need to be, maintaining pressure on the companies just weeks from announcing annual charges and the release of a report on the industry.Mr Sims, chairman of the Australian Competition & Consumer Commission, said the retail market for electricity had not worked well for consumers, with only some seeing lower prices as a result of deregulation.But he said most consumers were paying more than they needed to for electricity and some “many many hundreds of dollars a year” as a result of “opaque” practices in the retail industry.“I think the retailers are trying to keep the market as opaque as they can so that they can keep people on offers that are higher than they need to be,” Mr Sims told the Committee for Economic Development of Australia in Brisbane yesterday.The comments come ahead of an ACCC report due to be delivered by the end of June following a year-long inquiry into retail electricity prices. But they also come just weeks before electricity companies are due to deliver their annual pricing for 2018-19 in all states bar Victoria, which is set for December. Regulators and the federal government have been piling pressure on the industry to lower prices, with Energy and Environment Minister Josh Frydenberg last week warning companies that he expected to see retail prices fall in line with the 30 per cent fall in wholesale electricity prices in the past 12 months and highlighting the pending ACCC report.While he would not say what would be in the report, Mr Sims said the commission had looked right along the value chain and highlighted an earlier report that found network costs had been the biggest contributor to higher electricity costs. “There’s a lot of people working on it; it’s taken 10 years for the problems to come along, so hopefully we can fix it in a much shorter time, but it certainly has to be fixed,” he said.He added that the commission would look at enforcement action, but he doubted it would change the behaviour of electricity companies, saying enforcement action in the past hadn’t had much of an effect. “Something else might be required,” he said. Increased retail costs, including the cost of competing for customers in a deregulated market, and margins were the second-largest contributor, followed by higher generation costs and the costs of green schemes like the renewable energy target.“At the moment, it’s an extremely complex market to sell an extremely simple product. “We need to look at how we can make the market easier with consumers to engage with because at the moment it’s so complicated — people are on ridiculously high offers that they really don’t need to be on and shouldn’t be on,” Mr Sims said. He said electricity companies had been hiking basic offer prices in order to make their discounted offers more appealing.