Electricity competition in the Territory

by Energy Action | May 15, 2015
The Northern Territory Government is undertaking a suite of reforms to promote competition and efficiency in the electricity supply industry and greater alignment of regulatory arrangements with those operating in the National Electricity Market.

Following a review of the wholesale electricity market by the Utilities Commission, a number of reforms have been implemented by the NT Government. From 1 July 2014 the incumbent Power and Water Corporation was structurally separated into three separate entities:

Jacana Energy (retail)
- Power and Water (network); and
Territory Generation.

The separation of the incumbent monopoly Power and Water was the first step towards creating competitive retail and wholesale markets in the Territory. The Interim Northern Territory Electricity Market (I-NTEM) is now being established in the Darwin-Katherine region.

I-NTEM provides a framework to facilitate the wholesale arrangements of electricity between generators and retailers in the electricity market. Consumers can then choose to buy electricity from any of the retailers licensed by the Utilities Commission.

I-NTEM is designed to align the NT electricity market to other Australian markets. This initiative is supported by the creation of a Market Operator (MO) in addition to the existing System Operator (SO).

NT Article ChartSource: Power and Water Corporation

Within the I-NTEM framework, the MO manages the wholesale exchange of electricity based on the System Control Technical Code. This Code forms the initial market rules for the wholesale electricity market. The MO is responsible for:

- wholesale trading arrangements between generators and retailers;
- registration of all market participants operating in the electricity market;
- market settlements;
- daily publication of market prices and other wholesale trading data; and
- the calculation and issue of invoices to retailers and credit notes to generators.

As the System Control Licence holder for the Darwin-Katherine power system, the Power Water Corporation was designated as the I-NTEM MO in addition to its existing role as the SO. The SO responsibilities include:

- continuing to manage the dispatch of generating units and power system security,
- determine the wholesale market price within the I-NTEM framework, every 30 minutes.

Once the I-NTEM has been implemented, the NT Government will review the learnings from the design, development and implementation of the interim market, including stakeholder capabilities and feedback, and consider what arrangements are needed, and the expected costs and benefits, for a full NTEM. Under the proposed design for the full NTEM:
- Generators are to receive, and the demand side pay, a capacity payment related to installed capacity;
- Generators are to offer capacity at the marginal operating cost of each Generator into a security constrained gross dispatch process to be operated by the Power System Controller; and
- A common clearing price, or Market Price, is to be calculated and all energy dispatched by the Power System Controller will be paid at this price, although market participants will be entitled (but not obligated) to net out the effects of bilateral contracts between themselves.

There will be two crucial differences between the full NTEM and I-NTEM. 1. The first is that I-NTEM will not include the capacity mechanism and will require that Generators and retailers (Market Customers) enter into bilateral contracts that cover all customer demand. The bilateral contracts are therefore of critical importance to the proper functioning of I-NTEM and implicitly include the revenue and expenses that would flow under the capacity payment.

    1. The first is that I-NTEM will not include the capacity mechanism and will require that Generators and retailers (Market Customers) enter into bilateral contracts that cover all customer demand. The bilateral contracts are therefore of critical importance to the proper functioning of I-NTEM and implicitly include the revenue and expenses that would flow under the capacity payment.
    2. The second is that there will be no financial flows through the Spot Market component and as a result all commercial cash flows will be under the bilateral contracts at the agreed prices. Market settlements will therefore be virtual. 

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