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Southern processors join forces to tender for cheaper power and gas

by Beef Central, 16 October 2017

A GROUP of Victorian and New South Wales beef, sheepmeat, pork and poultry processors have won competition regulator approval to join forces to tender for cheaper electricity and gas.

The Australian Competition and Consumer Commission has issued a draft determination proposing to allow businesses in the new Eastern Energy Buyers Group to run joint tender processes for electricity and gas.

Energy costs have spiralled out of control for meat processors over the past three years.

The EEBG’s members have significant operations in Victoria and some operations interstate in agriculture and are industrial energy users, the ACCC said.

They include Victorian beef, sheep and pork processor the Gathercole Group; Tongala beef processor HW Greenham and Sons; Geelong beef and lamb processor MC Herd; the Colac and Melbourne-based Australian Lamb Co; Laverton North renderer CSF Proteins Pty Ltd and pork processor Diamond Valley Pork; animal nutrition manufacturer Ridley AgriProducts, New South Wales pork processor Rivalea (Australia) Pty Ltd, and Tomastown poultry and cheese processor Turi Foods and its farming division.

The ACCC said the proposed joint tender process would cover supply for electricity, gas and gas transport services to members of the group.

The authorisation would also allow other industrial energy users to join the group, provided the combined annual energy consumption does not exceed 16 Petajoules of gas or 4.5 Terawatt hours of electricity, which is around 10 per cent of Victorian consumption.

ACCC chairman Rod Sims said the commission considered that the joint tendering process was likely to result in public benefits.

“It would enable the group to seek more competitive pricing and terms through combining their gas and electricity demands,” he said.

Aggregating the groups’ demand and jointly tendering for long-term contracts may also provide incentives for investment in new generation, such as a small-scale power purchase agreement where EEBG would commit to acquiring the generator’s capacity up front, the ACCC said.

Joint tendering is also likely to help EEBG group members jointly share costs for services such as negotiating and legal services.

“There will be minimal public detriment from the proposed conduct. EEBG’s members currently account for a relatively small proportion of total demand for both gas and electricity in Victoria,” Mr Sims said.

On September 1, the ACCC granted interim authorisation to allow the group to commence the tender process on the basis that the group would not enter into a supply agreement with the successful tenderer(s) unless or until the ACCC makes a final decision granting authorisation.

The ACCC proposes to grant authorisation for 11 years, and is seeking submissions on its draft determination before making a final decision.

The ACCC said it may grant an authorisation when it is satisfied that the public benefit resulting from the conduct outweighs any public detriment. Authorisation is sought as the proposed conduct may contain a cartel provision or may have the purpose or effect of substantially lessening competition or be an exclusionary provision within the meaning of section 45 of the Act.

 

 



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