Enhancing Australia's Economic Prosperity
Resources Energy Tourism Department

Energy

The Australian Government is committed to the provision of adequate, reliable and affordable energy to meet future energy consumption needs and to underpin strong economic growth, consistent with the principles of environmental responsibility and sustainable development.
7.1: Market reform: underway but incomplete

Australian energy market reforms that began in the 1990s created national frameworks for governance, network regulation, planning, pricing, demand-side participation and non-economic regulation (Figure 7.2). They were accompanied by structural changes, such as the increasing privatisation of energy assets. This process has largely been driven by the Council of Australian Governments (COAG) Ministerial Council on Energy, which has now been replaced by the Standing Council on Energy and Resources.

Two major reviews of electricity and gas market reforms were conducted under the auspices of COAG to deliver productivity improvements in the energy sector: the 2002 Parer Review (Parer 2002) and the 2007 Energy Reform Implementation Group Review (ERIG 2007).

Many of the reforms identified in the two reviews have been implemented, including the development of more independent and effective market governance arrangements and reforms to network and retail arrangements.

Figure 7.2: History of Australian energy market reform

This figure illustrates the pipeline of energy market reform in Australia from 1993 until the present. It commences with the 1993 Hilmer National Competition Policy Review. 1995 saw the establishment of the Australian Competition and Consumer Commission and the National Competition Council. In 1996 the National Electricity Law and the National Electricity Rules were enacted. The Gas Pipeline Access Law and the National Third Party Access Code for Natural Gas Pipeline Systems came into force. The National Electricity Market (NEM) – applying in Queensland, New South Wales, Victoria, ACT and South Australia – was established in 1998. The Ministerial Council on Energy was formed in 2001 and in 2002, the Parer review: Toward a truly national and efficient energy market was completed. 2005 saw the establishment of the Australian Energy Market Commission, as well as Tasmania joining the NEM and the Gas Market Review. In 2006 the Australian Energy Regulator was established. The Energy Reform Implementation Group Review: Energy reform the way forward for Australia was undertaken in 2007. In 2008 the National Gas Law and National Gas Rules were enacted, and the Gas Market Bulletin Board was established. 2010 saw the establishment of the Gas Short-Term Trading Market (GSTTM) in New South Wales and South Australia. In 2011 the GSTTM extended to Queensland. The National Energy Customer Framework legislation was also enacted in 2011, and subsequently commenced in July 2012.

However, a number of areas are yet to be completed:

  • addressing issues related to government ownership, and potential problems from cross-ownership between generation and transmission (as identified in whole market reviews)
  • promoting greater competition in retail markets through the introduction of full retail contestability in all jurisdictions and, where effective competition exists, the deregulation of retail prices
  • improving the opportunities for efficient levels of demand response in the market
  • determining frameworks for the efficient deployment and use of interval meters, smart meters and smart grids
  • applying uniform non-economic regulation across jurisdictions
  • further optimising network regulation
  • reviewing derogations and differences between jurisdictional arrangements and the national regime
  • applying reforms in non-National Electricity Market (NEM) jurisdictions, most notably in Western Australia’s electricity and gas markets, for which the current Western Australian Strategic Energy Initiative is the key.

Some of these matters are beyond the jurisdiction of any single government and require a sustained, cooperative commitment over time. Despite differences in views between jurisdictions on some matters, the Australian Government considers that the COAG structure remains the most appropriate mechanism to advance these reforms, as demonstrated by its success in energy reform to date.

A number of market overview activities by the energy market bodies in the NEM and the non-NEM jurisdictions are underway, along with a range of market- and jurisdiction-specific reviews and development actions (outlined in chapters 8, 9, 10 and 11).

Page Last Updated: 8/11/2012 2:41 PM