The rules for trade in the national electricity market have been granted authorisation by the Australian Competition and Consumer Commission.
The development of the national electricity market is the culmination of reforms stemming from COAG decisions taken in July 1991 for the electricity industry and other micro-economic reform.
The authorisation of the National Electricity Code clears the way for the establishment of the National Electricity Market, to operate in the south eastern states of Australia.
The arrangements in the National Electricity Code will have efficiency benefits that should flow through to all Australians. Benefits will arise from the development of a wholesale electricity market which will facilitate competitive trading in electricity, including the dispatch of generation on a least-cost basis.
Benefits will also arise from access to transmission and distribution wires on a non-discriminatory basis, thus facilitating upstream and downstream competition. The benefits of reform arising from efficiencies will be passed on to end users through retail competition, which will also drive efficiency in the upstream wholesale market.
Overall, benefits are expected to stem from more efficient utilisation of infrastructure and capital, and the consistent and transparent treatment of all market participants across the interconnected grid.
The National Electricity Code sets out the rules for:
- the operation of the wholesale spot market;
- the institutional arrangements for the operation of the spot market; provisions for the safe and secure operation of the interconnected electricity grid;
- metering arrangements;
- the network pricing arrangements for regulation of the transmission and distribution networks; and
- the transitional arrangements that are to apply in each of the participating jurisdictions.
Some parts of the code have also been submitted to the ACCC as an access code, setting out the arrangements by which third parties can get access to the network infrastructure. The ACCC's assessment of the access code is the subject of a separate determination, still to be finalised. The ACCC's draft determination regarding the access arrangements was released on 29 August 1997.
Despite the huge potential for benefits from the implementation of the National Electricity Market, a number of problems detract from the code and reduce the likelihood that the full benefits of electricity reform will be realised. The benefits of reform will be limited where:
market distortions, due to perceived market immaturity, are not removed in a timely manner; the market is not allowed to operate without excessive intervention; certain derogations from the NEM arrangements are allowed to continue indefinitely; or trading in the market does not reflect competitive outcomes.
To address the concerns raised the ACCC has imposed a number of conditions of authorisation. These conditions deal with the transitional arrangements, some market distortions within the code, market monitoring and some barriers to entry created by the code provisions. The authorisation of the National Electricity Code will not take effect until the amendments to the code required by the ACCC are in place.
The ACCC has a continuing role regarding the National Electricity Market. It is expected that changes to the code will be submitted for authorisation fairly frequently when the market begins operation. The ACCC is also taking part in a review of the network pricing arrangements conducted by NECA and is still finalising its determination regarding the access code. The ACCC will also have to assess the access undertakings submitted to it by individual network service providers and to approve any changes to access undertakings submitted to it from time to time. The ACCC will also act on any anti-competitive conduct which might occur in the electricity market that may contravene Part IV of the Trade Practices Act, including proposed mergers or acquisitions which may contravene S.50.
The ACCC also has a further role as it will become a regulator of transmission pricing from 1 July 1999.
Copies of the ACCC's determination can be obtained on the ACCC web site:
http://www.accc.gov.au or from Ms Kaye Johnston on telephone (02) 6243 1258 (Canberra) or ACCC state offices in all capital cities.
For further information about this media release: Mr Allan Asher, Deputy Chairman, (02) 6243 1138; Mr Michael Rawstron, Senior Assistant Commissioner, (02) 6243 1249; Ms Kaye Johnston, Project Manager, (02) 6243 1258.