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Carbon Tax repeal: ACCC’s refrigerant pricing expectations

Carbon Tax smoke stackTHE Australian Competition and Consumer Commission (ACCC) has outlined how it expects industry to deal with the retrospective nature of the Carbon Tax repeal.

Because the Carbon Tax repeal legislation will not pass before July 1, the repeal will be applied retrospectively once passed, meaning importers of synthetic greenhouse gases (such as HFC refrigerants) have to keep collecting a Carbon Price levy beyond July 1 until the date of repeal.

Just as the ACCC was instructed to make sure businesses do not mislead customers on price rises by incorrectly blaming them on the Carbon Tax, the watchdog will be making sure cost savings are quickly passed on to customers once the Carbon Tax is repealed.

In response to a request by Refrigerants Australia executive director Greg Picker, the ACCC provided the following information:

“The ACCC’s role is to ensure that carbon tax costs removed by repeal are also removed from SGG prices as quickly as possible, including retrospectively if applicable, so that consumers who bore the costs see the benefit of the repeal.

“The ACCC’s view is that businesses should not get a windfall gain by retaining funds collected for supply between 1 July and the date of the repeal legislation to cover potential carbon tax costs which subsequently are not, and need not be, remitted.

“In the SGG sector, windfall gains would arise first at the importer level, where importers have collected funds from customers to cover the potential equivalent carbon price levy on SGGs imported from 1 July 2014 until the date of the repeal, which is not required to be remitted once repeal takes place.

“The ACCC does not expect importers to track whether particular cylinders sold to customers incurred a carbon tax. The ACCC would consider it acceptable for importers to return the windfall gain to their wholesale customers in the form of refunds or adjustments on a pro-rata basis to those who have purchased SGGs during the retrospective period.

“In turn, the ACCC expects wholesalers to pass on any refunds or adjustments received from importers and not keep that windfall gain but return it to their customers. The ACCC expects wholesalers to provide a refund or adjustment to large on-going customers, and to otherwise pay back the windfall gain through lower forward pricing. Again, the ACCC does not expect wholesalers to track whether particular cylinders sold to customers incurred a carbon tax, and would consider it acceptable for wholesalers to return the windfall gain to their customers on a pro-rata basis.

“The ACCC expects contractors to pass on the windfall gain through forward pricing, as facilitated by normal market competition and monitored by the ACCC.

“The proposed carbon tax repeal legislation will prohibit price exploitation by companies supplying SGGs. Following passage of the repeal legislation, the ACCC will consider any windfall gains from funds collected during the retrospective period in its assessment of whether SGG prices are unreasonably high. Unless windfall gains have been returned to customers, the ACCC will expect the value to be passed through to customers in some way.

“As part of its monitoring role, the ACCC will continue to monitor import volumes and wholesale purchases to ascertain the potential windfall gain collected during the retrospective period. The ACCC will be engaging with large users of SGGs to ensure the benefits of repeal, including windfall gains collected in the retrospective period, are passed on to customers.”

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