Hefty fines for electricity companies who fail to meet proposed carbon emission reduction targets could bankrupt retailers, one company believes.
Penalties up to $100 million could be imposed under the Turnbull government's national energy guarantee, which would legislate a 26 per cent emissions reduction target for the electricity sector.
The Energy Security Board is working through its final consultation stage on the draft design, due to be presented to the nation's energy ministers for sign-off early next month.
Jamie Lowe from French retailer Engie called the penalties heavy and questionable in a public hearing on the latest design on Monday.
"Are we really saying we're potentially going to bankrupt a company if they don't comply or is this really just an admission that this stick will never be used," he said.
"If that's the case then why implement it in such a way."
Anthea Harris, the ESB's emissions project director, earlier told the forum the current penalty regime is not fit for purpose and new maximum penalties would be an incentive to do the right thing.
The guarantee is the government's cornerstone energy policy and is hoped to return reliability and stability to the nation's electricity market while also bringing down prices.
"Some of the benefits of the NEG, I think, are already coming through in the wholesale pricing market," ESB chairwoman Kerry Schott said.
Price reductions anticipated in past modelling has held up and looks better than previous models, she said.
Her comments were backed by retailers.
Powershop's Ed McManus told the hearing they'd invested in more generation after seeing the draft and were in discussions about further long-term contracts.
"We like what we see and we're taking action as a result," he said.
Origin's Tim O'Grady said policy direction beyond 2020 was critical to driving investment, maintaining reliability and putting further downward pressure on prices.
But concerns still remain on aspects of the guarantee, including that the emissions reduction target for the electricity sector is too low, and that large user reliability obligations will require companies have a degree of energy market expertise they don't currently have.
Vince Duffy, an executive director of energy in the South Australian government, also suggested the ESB drop a three year notice period from its eight-step reliability guarantee process and replace it with permanent reliability obligations for retailers.
He said it would simplify the process substantially.
State and federal energy ministers will meet to discuss the guarantee on August 10.
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