Rio Tinto urges for stricter price regulation of East Coast electricity generators

Rio’s subsidiary Tomago Aluminium smelter in New South Wales has been struggling with uncertain power supply and higher power rate issues for years now.  Tomago, which is co-owned by Rio and has CSR subsidiary Gove Aluminium Finance consumes 12 per cent of the state’s electricity. It employs 1150 people and produces about 550,000 tonnes of aluminium a year. The smelter is currently facing production cut threat as a result of increasing wholesale electricity prices. Rio-controlled Boyne Island smelter in Gladstone has also reported the same concern sometimes back.

Rio Tinto blames the strong market power of east coast electricity generators for irregular price hike. They, according to the company spokesperson are exercising their power to deliberately drive up prices. The company has urged for stricter regulation in order to keep the smelters in operation.

Rio’s local head of aluminium, Bruce Cox has made an appeal to the Australian Competition and Consumer Commission saying that National Electricity Market is not as competitive as it should be. He has appealed for greater powers for the Australian Energy Regulator so that it can regulate generator behaviour when it threatens the market integrity. Mr Cox is chairman of Tomago and also sits on the Boyne board.

“The current regulatory framework of the NEM appears unable to curb the clear exercises of market power which have become increasingly apparent with shifts in ownership, asset closure and in some cases, consolidation of generators whose behaviour is unconstrained by considerations of affordability of electricity,” said Mr Cox.

Rio’s subsidiary Tomago Aluminium has been pushing for policies that would promote more coal-fired power, partly blaming generators for conditions leading to job and capacity cut.

Rio chief Jean-Sebastien Jacques hit out at the “absolutely wrong” behaviour of the Queensland’s state-owned power industry and called for government intervention after production and job cuts in Boyne Island smelter.

Rio says growing concentration of generators has left power wholesalers in a position to actively push prices higher by limiting generation at certain times.

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Mr Cox added that they would be happy to make recommendations on the scale and ownership of generation assets or expanding the role of the Australian Energy Regulator (AER), which is currently limited to mere monitoring. This way, they would like to contribute towards maintaining confidence in the wholesale market.