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Energy Market Regulation in Australia

NEM Regulation

The regulation of energy in Australia is a complicated subject, with many governing bodies, laws, rules, and entities that all have their own functions and roles to play within the energy market. Find our overview of energy legislation, governing bodies, and regulations in Australia, here.

Energy legislation in Australia

Energy legislation in Australia is under the jurisdiction of the Australian Energy Market Commission (AEMC), which was first created in 2005. The AEMC derives its power from the National Electricity, Gas, and Energy Retail Laws, which in turn allow it to create the regulatory rules of Australia’s electricity and gas markets.

The AEMC creates Australia’s rules and regulations for the energy market, with respect to the objectives set out in the legislative laws:

National Electricity Objective:

To promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity with respect to:

  • price, quality, safety and reliability and security of supply of electricity
  • the reliability, safety and security of the national electricity system
Ausralian Energy Market ComissionNational Electricity Law, Australia

National Gas Objective:

To promote efficient investment in, and efficient operation and use of, natural gas services for the long term interests of consumers of natural gas with respect to price, quality, safety, reliability and security of supply of natural gas

Ausralian Energy Market ComissionNational Gas Law, Australia

National Energy Retail Objective:

To promote efficient investment in, and efficient operation and use of, energy services for the long term interests of consumers of energy with respect to price, quality, safety, reliability and security of supply of energy.

Ausralian Energy Market ComissionNational Energy Retail Law, Australia

Energy governance and regulating bodies in Australia

There are many governing bodies which make up the Australian energy market, each with clear functions in order to legislate, regulate, and operate all facets of the gas and electricity market in Australia.

COAG Energy Council

The Council of Australian Governments (COAG) is the intergovernmental forum in Australia, which governs matters of national importance. Within the COAG, the Energy Council works together to promote a national energy agenda throughout Australia.

The COAG Energy Council is guided by its terms of reference, first established in 2015, and include the following:

  • The comprehensive responsibility and leadership of the Australian energy market, which includes developing the market, promoting energy efficiency and affordability, ensuring energy market security, and oversight of the other regulating bodies within the energy market
  • The promotion of efficiency and productivity through the development of new technologies
  • Ensuring the security of energy within Australia, including developing national emergency response policy, assessing long term market volatility, and promoting an energy market which is resilient to outside factors
  • The cooperation between national, state, and territory governments in order to improve the overall energy market through training, research, education, and community engagement
  • Encourage the development of Australia’s resources for a more sustainable future

The COAG Energy Council is guided by these terms of reference, and aim to promote the interests of energy consumers in Australia while ensuring greater productivity, efficiency, and sustainability of the energy market.

In addition, they aim to encourage stakeholder participation in energy policy, while working towards a more efficient and consistent governance process.

Australian Energy Market Commission (AEMC)

The Australian Energy Market Commission (AEMC) are the rule-makers within Australia’s energy market. They set out to create the official National Electricity, Gas, and Energy Retail Rules. The AEMC is held accountable by the COAG Energy Council and has two key functions:

  1. Create rules which protect the consumer while finding a balance between security, reliability, and cost
  2. Advise and guide Ministers on how to develop the future of the energy markets

The AEMC derives its power from the written National Electricity, Gas, and Energy Retail Laws and is guided by the National Energy Objectives. The rules created by the AEMC are enforced by the Australian Energy Regulator.

Australian Energy Regulator (AER)

The Australian Energy Regulator (AER) enforces the laws and rules of the Australian energy market in all jurisdictions except Western Australia, as well as set the Default Market Offer (DMO). The AER regulates the wholesale energy market, energy networks, and retail energy market. Within the wholesale energy market, the AER enforces the national energy legislation and rules while investigating and monitoring compliance.

The AER regulates the energy networks through setting caps on the amount of money of revenue able to be earned. Networks submit their required revenue proposals and the AER decides whether to accept or deny the proposal.

In the retail market, the AER aims to:

  • Ensure competition within the market when possible and regulate where competition is not possible
  • Provide consumers with the tools necessary to make educated energy market decisions and participate in the market in an effective way, while protecting those unable to ensure their own interests are being met
  • Think not only of the impact the energy market has on consumers today but in the long-term future as well.

Australian Energy Market Operator (AEMO)

The Australian Energy Market Operator (AEMO) is the governmental body responsible for the operation, development, and planning of the energy market across Australia including the National Electricity Market, and Wholesale Electricity Market in Western Australia.

The AEMO works to maintain and improve gas and electricity security, manage gas and electricity markets, and facilitate competition and data availability while leading the design for the future of Australia’s energy markets. It is made up of the following entities:

  • National Electricity Market Management Company (NEMMCO)
  • Victorian Energy Networks Corporation (VENCorp)
  • Electricity Supply Industry Planning Council (ESIPC)
  • Retail Energy Market Company (REMCO)
  • Gas Market Company (GMC)
  • Gas Retail Market Operator

Other energy regulators in Australia

Outside of the government, independent agencies exist to help regulate energy in the consumer’s interest and ensure energy customers are treated fairly and ethically.

Energy Consumers Australia

Energy Consumers Australia (ECA) is an independent agency that works to provide households and small businesses with a voice when it comes to the energy market. Energy Consumers Australia promotes the long-term interest of small energy customers with respect to the price, quality, safety, security, and reliability of energy services through research and analysis in order to identify issues and work with other organizations, governing bodies, regulators, and ombudsmen to help energy consumers.

State and territory Energy Ombudsman

Ombudsman are officials, representing the public's interest, who investigate and resolve complaints or disputes against an organization, company, or administration.

In Australia, each state or territory has its own Energy and Water Ombudsman services. Energy and Water Ombudsman in Australia are considered industry Ombudsman, and usually have a regulating board or council with both consumer and industry representation who appoint the Ombudsman.

Market regulation outside of the NEM

Outside of the NEM, Western Australia and the Northern Territory each have their own energy systems, which have their own regulating bodies and authority.

Western Australia Energy Regulation

Western Australia regulates its own energy, with some overlap from the NEM regulating bodies. Electricity in Australia is not on the National Electricity Market, instead, they have their own Wholesale Electricity Market (WEM). The WEM is designed to:

  • Promote the efficiency, safety, and reliability of electricity production
  • Encourage market competition through the facilitation of efficient entry for new competitors
  • Prevent discrimination against energy or technological options, such as renewable resources
  • Minimize long-term costs for consumers
  • Educate consumers on how to manage electricity usage

The WEM is regulated by a number of entities: 

  • The AEMO operates the WEM, in accordance to the WEM rules and procedures which were first established by the Minister for Energy.
  • The Economic Regulation Authority (ERA) regulates, monitors, and enforces compliance with the rules.
  • The Rule Change Panel is an independent organization which looks over the administration and decision-making functions in regards to changes in the WEM rules, and the Electricity Review Board is an adjudicator for appeals.
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