Australia’s stationary energy supply system underpins the efficient development of the national economy and is vital to maintaining and improving the community’s living standards.

esaa supports:

• the development of open, competitive national energy markets free from distortions as the corner-stone of Australia’s stationary energy supply system
• economically efficient regulation of the monopoly parts of the system to facilitate competitive market outcomes, timely efficient investments and reliable energy supply.

The energy market reform component of national competition policy has been transforming Australia’s stationary energy system since the 1990s from integrated State- and Territory-based public monopolies into competitive national supply and retail markets complemented by efficient national regulation of monopoly network prices and services.

The reform program remains incomplete, with prices in competitive retail markets continuing to be regulated by State and Territory Governments, and the implementation of a single national legal framework for regulating retail market services and non-economic distribution network services not scheduled to commence until September 2009. 

A number of more recent reform commitments made in 2007 also are scheduled to be implemented in 2009.

Energy market reform - major developments since:

2004
The Council of Australian Governments (COAG) Australian Energy Market Agreement provides for the progressive introduction of new governance arrangements from mid-2005, comprising:

• the COAG Ministerial Council on Energy (MCE) to be responsible for national energy policy and governance
• the Australian Energy Market Commission (AEMC) to be responsible for rule-making and market development functions in respect of the National Electricity Market (NEM), and electricity and natural gas transmission
• the Australian Energy Regulator (AER) responsible for enforcement of the rules for the National Electricity Market (NEM) and economic regulation of electricity and gas transmission
• the AEMC and AER to be responsible for economic regulation of electricity and gas distribution networks by no later than 31 December 2006.

2006
An amended COAG Australian Energy Market Agreement provides for:

• a streamlined national approach to economic regulation and access to energy networks
• deferral of the implementation of a national framework for distribution and retail regulation under the AEMC and AER until 1 January 2008
• the phasing out of retail price regulation where there is effective competition in retail electricity and gas markets, with the AEMC to be responsible for assessing the effectiveness of competition for the purpose of retention, removal or reintroduction of retail energy price controls.

In February 2006, COAG also committed to the progressive roll out of electricity smart meters, with an implementation plan to be developed that has regard to costs and benefits and takes account of different market circumstances in each state and territory.

2007
COAG agreed in April 2007 to improve the efficiency and effectiveness of the national energy markets by establishing by 1 July 2009 a single Australian Energy Market Operator (AEMO) to combine administration of the NEM, a new NEM transmission planning function, and new gas market development functions. 

COAG agreed also that the AEMO will be established under new national governance arrangements involving the appointment of an independent skills-based AEMO Board and including market participants in the AEMO Board appointment processes.

MCE legislation to commence the transfer of distribution network economic regulation to the national framework under the AEMC and AER was passed in November 2007.

The MCE agreed in December 2007 to again defer the introduction of legislation for the national regulation of non-economic distribution and retail energy market services until September 2009. The timetable for transferring State and Territory functions in this area to the national framework has yet to be announced.

2008
The MCE published an implementation plan synopsis for the establishment of the AEMO.

MCE legislation to transfer natural gas pipeline access regulation to the national framework under the AEMC and AER was introduced in April 2008.

MCE announced in June 2008 that the membership of the Australian Energy Market Operator will be shared between government and the energy industry; government will hold 60 per cent of the voting entitlements of AEMO and industry the remaining 40 per cent. MCE also announced the five-member Selection Panel for the non-executive Board of AEMO.

In June 2008 MCE committed to development of a consistent national framework for smart meters in the National Electricity Market. While smart meter deployment continues in Victoria and New South Wales, MCE will consider by June 2012 further deployment timelines in all jurisdictions, based on the findings of extensive pilots and business cases to confirm benefits, costs and risks.

MCE agreed in June 2008 that the Australian Energy Market Commission will conduct a review of the energy market frameworks in light of the introduction of emissions trading and the renewable energy target.