Electricity market reform back on the agenda for South West grid

AER – Australian Energy Regulator

Aug 23
Electricity market reform back on the agenda for South West grid

In a speech to the Energy in Western Australia Conference on 23 August, Energy Minister Ben Wyatt announced the Government’s intentions for reform of the Wholesale Electricity Market (WEM).  The WEM supplies electricity to the major population centres in Western Australia extending from Perth to Kalgoorlie, Albany and Kalbarri.

The reforms that were announced today are in some respects similar to those contemplated by the previous Barnett Government under the Electricity Market Review (EMR) programme and include. The McGowan Government intends to:

  • Introduce legislation to Parliament by mid 2018 to move from a firm to a constrained policy for access to Western Power’s poles and wires,
  • Introduce measures to address market power by the dominant generator and retailer, Synergy, including facility bidding for its generators, and
  • Consult further with industry before making any changes to the pricing mechanisms in the Reserve Capacity Market.

A key difference to the previous reform proposals is that regulatory oversight will be retained locally by the Economic Regulation Authority under local rules.  Under the EMR reform proposals, regulatory oversight would have moved to the Australian Energy Regulator (AER) applying the framework from the National Electricity Market (NEM).

Introducing a constrained network access model is likely to reduce red tape and costs for new generation projects connecting to the grid.  However, significant changes to market rules and associated IT systems will be required to implement this reform.  The Government is hopeful that the new rules can be in place by 2020.

The Government will consult further with industry before making any changes to the Capacity Market.  The Barnett Government made a number of changes including committing to a mandatory auction to allocate capacity credits and determine the market price of capacity.  A potential move to an auction mechanism will be delayed at least until 2021 and may not be introduced at all pending the outcome of further consultation.