Settlement of proceedings taken by the Economic Regulation Authority against Synergy in relation to its bidding behaviour in the Wholesale Electricity Market
The Electricity Review Board has made final orders in relation to proceedings commenced by the Economic Regulation Authority (ERA) against the Electricity Generation and Retail Corporation t/a Synergy (Synergy) in May 2019 (Electricity Review Board Application 1 of 2019). The proceedings concerned Synergy's behaviour in the Wholesale Electricity Market during the period 16 April 2016 to 10 July 2017 (Investigation Period). During that period, Synergy changed its approach to determine the prices it offered for electricity in the Balancing Market (part of the Wholesale Electricity Market) by changing the way it calculated the start-up costs and gas input costs for its gas fired generators. The change in approach increased the start-up costs and gas input costs used by Synergy.
The ERA alleged that, as a result of this change in approach, across 11,012 Trading Intervals during the Investigation Period, Synergy offered prices in Balancing Submissions in excess of Synergy's reasonable expectation of its short run marginal cost of generating the relevant electricity, and such behaviour related to market power in contravention of clause 7A.2.17 of the Wholesale Electricity Market Rules.
The matter was heard by the Electricity Review Board from 10 May 2021 to 17 May 2021 and on 8 and 9 June 2021. The Electricity Review Board handed down its decision in respect of liability in the proceedings on 7 November 2022 and held that:
(a) on each day between 16 April 2016 and 10 July 2017 inclusive; and
(b) in respect of the Trading Intervals commencing at 6.00am and ending at the end of the 11.30pm Trading Interval for which the prices offered
by Synergy in Balancing Submissions exceeded $40/MWh,
being 11,012 Trading Intervals, Synergy engaged in conduct in contravention of clause 7A.2.17 of the Wholesale Electricity Market Rules.
Synergy admits the contraventions of clause 7A.2.17 of the Wholesale Electricity Market Rules.
The ERA has agreed that it will not seek that Synergy pay a civil penalty and to resolve the proceedings Synergy and the ERA have agreed that Synergy would:
(a) implement the 'Customer Offset for Synergy Compliance Breach';
(b) implement a review of the circumstances giving rise to the contraventions of the Wholesale Electricity Market Rules; and
(c) publish this Statement.
As a result of the settlement agreement between the parties, the Electricity Review Board has concluded the proceedings,
Customer Offset for Synergy Compliance Breach
Synergy will provide the Customer Offset for Synergy Compliance Breach to eligible non-contestable customer accounts. The Customer Offset for Synergy Compliance Breach will be a one off account credit that is unable to be cashed out. The terms and availability of the Customer Offset for Synergy Compliance Breach will be similar to previous State Government offsets applied to Synergy eligible customer accounts such as the "WA Household Electricity Credit Offset". The total amount of the Customer Offset for Synergy Compliance Breach payable by Synergy to eligible customers is $30 million.
No overcharge
Synergy's conduct did not directly affect the price of electricity for residential customers which are set by the State Government so the Customer Offset for Synergy Compliance Breach is not compensation for an overcharge. Rather, it is being provided as a result of Synergy's agreement with the ERA that the ERA will not seek a civil penalty for the contraventions of the Wholesale Electricity Market Rules provided that Synergy provide the Customer Offset for Synergy Compliance Breach to eligible non-contestable customers.
Synergy's review
Under the terms of its agreement with the ERA, Synergy will institute a comprehensive review into the circumstances giving rise to the contraventions of the Wholesale Electricity Market Rules.
Synergy's compliance with the Wholesale Electricity Market Rules
Since the Electricity Review Board's decision, Synergy has been working with the ERA to ensure that its bidding behaviour is compliant with the Wholesale Electricity Market Rules. Synergy is committed to complying with the Wholesale Electricity Market Rules and engaging with the ERA going forward so that it remains compliant with the Wholesale Electricity Market Rules.
27 JUNE 2023
What does this mean for Synergy customers?
Read our FAQs for more information on the Customer Offset for Synergy Compliance Breach.