Electricity Market Review – Triangular contracting framework

WEM Information

Jun 15
Electricity Market Review – Triangular contracting framework

On 15 June 2016, the Market Competition work stream within the Electricity Market Review published a position paper for consultation outlining a proposed new contracting framework for the provision of electricity network services in the South West Interconnected System (SWIS).  This framework would not apply outside the SWIS and will not apply to the gas sector.

Currently, the network contracting framework is linear; network distributor (Western Power) to retailer to customer.  With the introduction of elements of the National Electricity Rules (NER) as part of the wider electricity reforms currently underway, the existing linear framework is required to change to a triangular arrangement, since this is the basis on which the NER have been designed to operate.

Under a triangular arrangement, Western Power will supply services directly to customers; retailers will not purchase network services but will bill for them on behalf of Western Power.  The position paper confirms that the intended reforms will not impede the introduction of full retail competition at a later date and are currently in force in most other jurisdictions in the National Electricity Market.  The National Energy Customer Framework has provided a general, non-binding design template for the framework and the new arrangement will be implemented to have minimal impacts on customers.  Although the new arrangement will require Western Power and Retailers to work closely together to coordinate service delivery and billing.

Introduction of the triangular arrangement will require changes to the Electricity Industry Act 2004, (EIA) with the introduction of a ‘Distributor Customer Part’ providing a heads of power to enable creation of new regulations or amendments to existing regulations or other legal instruments.  These regulations will govern such issues as the terms and conditions for new supply contracts between distributor and customer, a framework for the negotiation of supply contracts and a regulatory framework to ensure appropriate compliance monitoring by the Economic Regulation Authority (ERA).

The new regulations are intended to take effect on 1 July 2018, to align with the adoption of national network regulation framework.  However, in order to meet this timeframe, legislative changes to the EIA are expected to be passed by Parliament by November 2016.  Subsequent amendments to regulations and other instruments are expected to be gazetted in the second or third quarter of 2017, to allow industry participants time to prepare for commencement of the new arrangements.

Interested parties are requested to provide submissions on the position paper by 13 July 2016.