MacGen is the lowest cost, large-scale baseload generator in NSW. It has a total capacity of about 4600 megawatts.
The tribunal concluded the proposed $1.5 billion acquisition would result in such public benefit that it be allowed to occur. It also imposed conditions on the authorisation including an obligation that AGL offer not less than 500MW of electricity hedge contracts to small retailers in New South Wales each year for seven years.
AGL has more than 800,000 retail customers in NSW but, until its MacGen acquisition goes through, no generation assets in the state.
The Australian Competition and Consumer Commission had previously ruled against the takeover, saying it was not in the interest of NSW electricity customers.
The tribunal was required to apply a different test than the ACCC. It just had to be satisfied that the acquisition would be likely to result in such benefit to the public that it be allowed to occur.
ACCC chairman Rod Sims said the watch dog had to accept the tribunal’s decision.
“However, the ACCC is disappointed that the tribunal has authorised the proposed acquisition given that, if it proceeds, the ACCC considers it would have significant implications for the future of competition in, and performance of, the retail and wholesale electricity markets.
“This is because if the acquisition of Macquarie Generation by AGL proceeds, the three largest generators in NSW will have been sold to the three largest retailers, resulting in a permanent structural change in the NSW electricity market.
“These vertically integrated retailers will dominate electricity supply. The ACCC remains of the view that privatisation of these assets to an alternative bidder would achieve a more competitive outcome, which in turn will benefit NSW consumers.
“The ACCC also remains concerned about whether the conditions of authorisation are able to be effectively enforced.”
The tribunal decision can be appealed, however, there are only limited grounds for such action and they have to be based on errors of law. The ACCC has 28 days to launch an appeal.
According to the electricity unions backed “Stop the Sell Off” campaign, the tribunal’s decision was a win for big business at the expense of consumers because the three largest energy retailers in NSW would own 80% of the state’s electricity generation capacity.
“In March the consumer watchdog scuttled this $1.5 billion sale, saying it was not in the best interest of NSW electricity consumers as it would lead to higher power prices, reduced competition and restriction of new retailers from entering the market,” Stop the Sell Off campaign director Adam Kerslake said.
“Not content to accept the ruling of the ACCC, AGL appealed – with the full support of the NSW government – taking advantage of a sneaky legal loophole that lowers the bar when considering consumer impacts.
“What we have seen is a huge win for big business, who will now take ownership of the state’s largest electricity generator at the expense of electricity consumers.”
AGL, not surprisingly, welcomed the tribunal’s decision.
AGL managing director Michael Fraser said the company had argued that the MacGen acquisition would “not lead to a substantial lessening of competition and would bring public benefits to the people of NSW”
“Today’s decision vindicates that view.”
