The Australian Government uses the following framework to guide its consideration of energy market design and operation. These principles complement the overall energy policy framework set out in Chapter 1: A framework for national energy policy.
To maintain well-functioning energy markets and services that deliver reliable, safe, secure and competitively priced energy for all Australians, including by:
- encouraging timely and efficient investment in all facets of the energy delivery system
- promoting competitive and accessible energy services
- providing appropriate transparency and protection for consumers.
- Energy markets and services should deliver outcomes that are in the long-term interests of consumers.
- Energy market regulation should be nationally consistent to the greatest extent practicable.
- Energy market design should not give preference to particular technologies or fuel types.
- Market regulation should be stable, predictable, efficient, effective, transparent and accountable.
- Energy markets should interface efficiently and effectively with other relevant markets and policy and regulatory frameworks to provide for integrated least-cost decision-making.
- Government participation in energy markets should be minimised; where it does occur, it should preserve market integrity and comply with competitive neutrality policy.
Ensuring that energy markets should operate in the long-term interests of consumers is fundamental to the government’s approach. This means efficiently balancing supply and demand while promoting accessibility and reliability in meeting Australia’s long-term energy needs at a competitive price. It also follows that market participants must be able to earn adequate returns to ensure that sufficient and efficient levels of service and investment are maintained over the longer term to ensure reliability and security of supply.
7.2.1 Characteristics of well-functioning markets
In assessing whether energy delivery goals are being achieved (and therefore whether there is a case for government intervention in the markets), the definition of ‘well-functioning markets’ is critical.
While the needs of the liquid fuels, electricity and gas markets differ, all well-functioning energy markets seek to maximise competition, including through:
- transparent and effective market objectives
- transparent and supportive rules and regulations that do not introduce material barriers to entry or exit
- clear and effective governance arrangements, including independent and accountable institutions to regulate and operate markets
- appropriate information systems to inform market participants, policymakers and regulators
- efficient regulation of monopoly network infrastructure
- price signals that reflect the full costs and benefits of production, supply and consumption
- well-functioning financial markets to provide certainty, strengthen competition and lower entry costs for new participants
- active consumer participation
- non-integrated and competitive ownership structures throughout the supply chain.