WA Electricity Market Review

by Energy Action | Apr 09, 2015
On 24 March 2015 WA Minister for Energy Dr Mike Nahan, launched Phase 2 of the Electricity Market Review and the State Government’s response to the Options Paper produced by the Phase 1 Steering Committee.

On 24 March 2015 WA Minister for Energy Dr Mike Nahan, launched Phase 2 of the Electricity Market Review and the State Government’s response to the Options Paper produced by the Phase 1 Steering Committee.

Back in March 2014, the Minister for Energy launched the Electricity Market Review to examine the structures of the electricity generation, wholesale and retail sectors within the South West Interconnected System (SWIS) in Western Australia and the incentives for industry participants to make efficient investments and minimise costs.

The first phase of the Review – which is now complete – comprised an assessment of the strengths and weaknesses of the current industry structure, market institutions and regulatory arrangements and an examination of options for reform to better achieve the Electricity Market Review objectives.

As part of Phase 1 of the Review, a number of options to deal with the higher electricity prices in WA compared to the rest of Australia were raised, including whether WA should join the National Electricity Market, or reform the existing market.

Phase 2 was launched on 24 March 2015 and will be carried out through a two-staged process. Stage 1 involves the detailed design of reforms, after which decisions will be sought by Government to proceed to implementation through Stage 2. Decisions with respect to what reforms will progress from detailed design to eventual implementation is expected to occur progressively over 2015-16 and 2016-17.

It is likely new market opportunities will be created for entrants into the WA retail electricity sector. However whilst the Government has flagged discrete asset sales, probably in the generation market, it appears that full or large scale privatisation in the electricity sector will not proceed.

Whether or not WA takes on full adoption of NEM structure in the future is at yet uncertain, however the SWIS will move towards a NEM-like energy-only system (as opposed to the current capacity plus energy market).

As yet it is difficult to determine if there will be any implications of the proposed market restructure on existing energy contracts.  At some stage customers contractual arrangements may need to be reviewed and tested.

The reform projects will be categorised into four key workstreams with a number of projects within each workstream. The key workstreams include:

This workstream will look at transferring regulation of the Western Power network including price, connection and access, from the Western Australian regime to be regulated under the National Electricity Law and Relevant National Electricity Rules. It will also involve applying the relevant National Electricity Rules to regulate metering services within the Western Power network area.

This workstream will include reforms to enhancing market competitive outcomes through full retail contestability and the removal of barriers to entry in the retail and wholesale market. The full retail contestability project will involve designing the systems and structures to allow for full electricity retail contestability and the commensurate removal of the moratorium that prevents Synergy from retailing gas to residential customers.

This workstream involves three broad projects entailing combining the Independent Market Operator and System Management, creating a new market rule change committee and replacing Western Australian Energy Disputes Arbitrator and Western Australian Energy Disputes Board with more cost-efficient dispute resolution bodies and procedures.

This workstream will involve three broad projects; reform to the Reserve Capacity Mechanism to address the manner in which the capacity price and volume is determined; reform to existing market operations and processes such as introducing facility bidding and reforming the reliability standard; and the potential development new market operations and processes to co-optimise ancillary services.

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