West Australian Electricity Market Review

by Energy Action | Aug 02, 2016
The West Australian Minister for Energy recently announced the introduction into the WA Parliament a package of legislation to adopt the national regulatory framework in WA. If the Parliament enacts the Bills, it is anticipated that they will achieve Royal Assent in November 2016.
Electricity markets
One of the principal objectives of this legislation package is to adopt the National Electricity Law regulatory scheme in Western Australia. 

Specifically, the legislative reforms relating to the electricity sector include: 
 • Transferring regulation of Western Power’s transmission and distribution networks     to the National Electricity Law and National Electricity Rules, with regulatory  responsibility assigned to the Australian Energy Regulator (AER); and 
 • Implementing a constrained network access framework in the South West Interconnected System

The Western Australian Government’s decision to adopt the national regulatory framework was made through the Electricity Market Review which found that the current regulatory framework for the Western Power network under the State-based Electricity Networks Access Code 2004 is not meeting the needs of electricity industry participants and electricity customers.

The Government says the operation of the national regulatory framework in Western Australia will result in lower connection costs for generators and customers connecting to Western Power’s network and will reduce existing barriers to entry into the wholesale electricity market for generation businesses that can offer more efficient, lower cost generation. Additionally, greater discipline will be imposed on investment decisions by Western Power that will ensure that electricity customers only pay for investments that support effective delivery of electricity services at lowest possible cost.

Only the Western Power network will be subject to regulation under the national framework. Horizon Power and other unregulated electricity networks in Western Australia will not be brought under the national regulatory framework at this time. 
As part of the Electricity Market Review, transitional arrangements to facilitate regulation of Western Power’s transmission and distribution network by the AER from early 2017 have been developed, with the new regulatory framework commencing from 1 July 2018.

Gas markets
The legislation package also includes transferring gas pipeline regulatory functions from the Economic Regulation Authority (ERA) to the AER. The Government says the purpose of the transfer is to shift the regulatory role to the national energy regulator who has the scale and technical capability to be better able to undertake the regulatory role into the future and will remove inconsistency in regulatory practice between Western Australia and other States and Territories.

Not all aspects of the National Gas Law will apply in Western Australia as applied law. Provisions in the National Gas Law that were not adopted when Western Australia joined the national regulatory framework in 2009 will largely remain. These include: 
 • Western Australia not participating in the short-term trading markets operating on the  east coast; 
 • Western Australia retaining its own Natural Gas Services Bulletin Board; and 
 • Western Australia retaining the requirement for uniform tariff policy for small-use  customers on distribution pipelines. 

The first stage will be the transition period to commence from 1 July 2018 where the AER will take over regulatory responsibility from the ERA for each gas pipeline under their prevailing Access Arrangements as approved by the ERA. This transition period is expected to apply until such time as each gas pipeline commences its next Access Arrangement period. 

Wholesale markets
The WA Government has also announced major reforms to the wholesale electricity market in the south-west of Western Australia, which the Government expect will deliver savings of up to $370 million.

Energy Minister Mike Nahan said the reforms would provide greater accountability and more flexibility for power station owners and electricity retailers in buying and selling energy, ensuring electricity was produced and delivered at the lowest possible cost.

Under new arrangements which will come into effect on July 1 2018, the Australian Energy Market Operator will use sophisticated systems to administer the wholesale electricity market and operate the electricity system.  These systems will provide instructions to generators supplying electricity and the energy services, enhancing the safe, secure and reliable delivery of electricity services.

The reforms will come into effect on July 1, 2018, coinciding with WA's adoption of the national energy regulation framework.
 

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