The National Electricity Market (NEM) was established in 1998 and is a wholesale market through which generators and retailers trade electricity. The NEM comprises six participating jurisdictions which are linked by transmission networks - Queensland, New South Wales, Australian Capital Territory, Victoria, Tasmania and South Australia. Western Australia and the Northern Territory currently operate their own electricity markets.
In addition to the NEM physical market, an electricity financial market operates to allow market participants to manage their risks.
The key bodies involved in the electricity market's policy development, operation and regulation include the:
The Department of Resources, Energy and Tourism is the lead Commonwealth agency which drives electricity market policy in the energy market reform program being implemented by the Ministerial Council on Energy. Key streams of this program include establishment of:
- a National Transmission Planning function and Australian Energy Market Operator
- a national framework for transmission reliability standards
- measures to deal with remote and embedded generation
- measures to increase demand-side responsiveness
- the transfer of retail regulation to the national framework
- a process and framework upon which retail prices caps are removed, where there is effective retail competition.
A competitive and efficient electricity market is integral to the secure, safe and reliable supply of electricity to Australian consumers and to the competitiveness of the Australian economy. The energy market reform program looks to drive efficient energy markets through:
- increased information transparency
- facilitation of competition
- better price signals to encourage efficient supply side investment
- better demand side market participation
- putting in place an appropriate regulatory access framework
- strong governance arrangements.
The electricity investment framework is developed around market-based signals to encourage efficient locational decisions, and appropriately-timed investment decisions.
Having the appropriate market framework in place better enables the electricity market to address the future challenges facing the electricity sector over the next decade, including increasing demand and the impact of climate change policy.
Further information on all these reforms is available at the The Ministerial Council on Energy 
website.