ENERGY MARKET REFORM

The drive for efficiencies in Australia’s energy markets has been a major focus of the Commonwealth, in partnership with the states and territories, for nearly 20 years.

AGS has been advising the Australian Government over much of that time, as it worked with the other members of the Council of Australian Governments’ Ministerial Council on Energy to develop energy market policies, institutional frameworks and legislation. 

Reforms

Key reforms over the last five years have seen the transfer of regulatory regimes conducted under state and territory laws to a national cooperative framework covering electricity transmission and distribution networks and natural gas pipeline services.

The reforms have occurred via a number of reviews and intergovernmental agreements, most recently in the form of the Australian Energy Market Agreement, which was first executed in 2004 and amended in 2006. From 2004 to 2009, the Ministerial Council on Energy established three new energy market institutions and passed seven legislative packages addressing governance, electricity and gas transmission and distribution services, and electricity and gas markets. Significant efficiencies, and cost savings of some millions of dollars, have been achieved.

The regulation of energy is now carried out under a cooperative Commonwealth, state and territory scheme based on:

• the National Electricity Law, a schedule to the National Electricity (South Australia) Act 1996, and associated rules regulating electricity supply
• the National Gas Law, a schedule to the National Gas (South Australia) Act 2008, and associated rules regulating natural gas pipeline services.

The two laws are ‘templates’ enacted by South Australian law and adopted and applied (as amended from time to time) by South Australia and other participating jurisdictions. A third law covering retail issues is currently under development.

National regulatory authorities

Two of the new national institutions were established following reforms in 2005 to oversee the regulation of energy by the National Electricity Law and the National Gas Law. These are:

• the Australian Energy Regulator, established by the Trade Practices Act 1974, with responsibility for economic regulation of the relevant networks
• the Australian Energy Market Commission, a statutory authority responsible for rule making and market development.

The third national entity has now been established – the Australian Energy Market Operator (AEMO) – to manage operational aspects of Australia’s electricity and gas markets. AEMO commenced operations on 1 July 2009, replacing a number of state-based authorities and the National Electricity Market Management Company, strengthening the national character of energy market governance. AEMO operates under the National Electricity Law and National Gas Law, and is funded by market participants.

Further developments

A Natural Gas Services Bulletin Board has been established, which provides market information about the supply of, and demand for, natural gas. Also, a gas short-term trading market, an enabling framework for smart metering, and a national non-economic regulation package (the National Energy Customer Framework) are all in advanced stages of development.

AGS’s support

AGS has provided advice and assistance to government on all these reforms for a number of years. Several AGS lawyers, including Jenny Francis, Peter Nicholas, Danielle Chifley, Adam Kirk and Rebecca Eldred, have been outposted to the Department of Resources, Energy and Tourism to work side-by-side with policy officers. Their work has been supported and supervised by Guy Aitken, Leo Hardiman and Robert Orr QC.