The Review of Governance Arrangements for Australian Energy Markets examining the broad energy market institutional structure as well as the legislative framework that establishes and assigns functions to institutions was completed in October 2015.
The Review considered the performance of the current governance arrangements of the Australian energy markets and provides recommendations to the Energy Council on potential areas of improvement to the Australian Energy Market Commission (AEMC), Australian Energy Regulator (AER), and Australian Energy Market Operator (AEMO).
The Review considers the AEMC’s role as rule maker and advisor to the Energy Council is increasingly important and recommends that this role be reinforced through greater reliance on the AEMC for the development of strategic advice.
The AEMC should prepare a major policy report every three years on strategic direction the Review recommends, including policy priorities and work program. Such a report would also include a comprehensive review of the rules as a whole.
The Review considers that the AER culture is not fully conducive to its regulatory role due to fact that the culture and skills required to regulate an industry differ from those of a competition law enforcement agency. On that basis, the Review considers the AER’s performance could be strengthened by establishing it as an independent organisation, separating it from the Australian Competition and Consumer Commission (ACCC).
Other recommendations include retaining the current scope of the AER's responsibilities and having the AER's performance reviewed every three to five years by a panel of experts appointed by the Energy Council. This has come about from stakeholder and industry concerns with the outcomes of past price reviews and the AER's own recognition of the need for improvement.
The Review notes that whilst the AEMO has performed well in an increasingly challenging environment, there is room to improve the clarity of AEMO's role.
The AEMO should not be specifically tasked with policy or market development roles, but should be more clearly focused on developing procedures for the purposes of market operation within the energy market, the Review stated.
The Review also states that AEMO should remain a not-for-profit company and did not recommend any change to AEMO's ownership structure (which is currently a combined ownership of government members, who hold 60 per cent of voting rights, and industry members, who hold 40 per cent).