AER electricity wholesale performance monitoring - Hazelwood advice - March 2018

Special report
Event date: 
3 November 2016
Release date: 
29 March 2018


The AER has released a report on the market outcomes in Victoria and South Australia since the closure of the Hazelwood power station. On 3 November 2016 the Treasurer and the Federal Minister for Environment and Energy requested that the AER monitor market developments in Victoria and South Australia in light of the potential for the closure of Hazelwood to enable anti-competitive behaviours among remaining generators. We were requested to provide advice to the Council of Australian Governments (COAG) Energy Council on any factors affecting the efficient functioning of the market within one year of the station's closure.

Our key finding is that the exit of Hazelwood removed a significant low fuel cost generator, which was largely replaced by higher cost black coal and gas plant - at a time when the input costs of black coal and gas plant were increasing. These factors, in turn, drove significant increases in wholesale electricity prices. We found no evidence to suggest that prices were being driven by rebidding close to dispatch, or physical or economic withholding - behaviours more usually associated with the exercise of market power.