Understanding the National Electricity Market (NEM)
The National Electricity Market is an interconnected energy grid comprising of all regional networks in Queensland, New South Wales, Victoria, South Australia and Tasmania. Although connected, each state represents a separate market, containing its own legislation, networks, retailers and customer conditions.
The NEM is a synchronous transmission grid. Supply and demand fluctuations in one state can affect other states as energy is drawn from other networks to ensure capacity is maintained. Established in 1998, the market welcomed Tasmania in 2006 as its most recent region. The Snowy region was abolished in 2008 and split between NSW and Victoria, while the ACT was absorbed into NSW.
The NEM operates a power system more than 4,000kms in length – from Port Douglas, Queensland to Port Lincoln, South Australia. Over AUD $11 billion worth of electricity is traded annually on the market to supply eight million consumers.
NEW SOUTH WALES
On 1 March 2011, the NSW Government began the sale of its retail energy companies. Country Energy, Integral Energy and their customers became part of Origin Energy, while Energy Australia and its customers became part of TRUenergy. Network assets, Essential Energy, Ausgrid and Endeavour Energy remain government owned and have merged to become Networks NSW. Energy customers in New South Wales have access to three types of energy offers:
- Standing Offers – an offer at standing offer prices under a standard retail contract from the ‘designated retailer’;
- Regulated Offers – an offer at regulated prices, set by the NSW Independent Pricing and Regulatory Tribunal (IPART), available to users under 160 MWh per annum;
- Market Retail Offers – an offer at a market contract rate, not set by IPART and possible lower than a regulated rate.
ActewAGL Retail is required to offer a regulated price as a standing offer to electricity users. As the ‘designated retailer’ of the ACT it is responsible for ensuring customers receive an offer of supply of electricity or gas when they move into a premises.
Since 2007, most residential and small business customers in Queensland have been able to choose their energy retailer. Prior to this, only large C&I customers were able to do this. Network areas in Queensland are Ergon Energy and ENERGEX.
There are still restrictions in certain areas of the state. For example, if an Ergon Energy customer opts to contract with a different retailer, they will not be able to return to Ergon Energy at that given premises. Retailer choice and price competitiveness also differs between certain areas.
Queensland classifies small market users as anyone using less than 100 MWh per annum, unlike the rest of the NEM (less than 160 MWh per annum).
Network charges are expected to increase by 15.7% in the Energex region, and 11.3% in the Ergon area for the 2012/13 year.
With regard to large market contracts, South Australia is unique as it does not follow the rest of the NEM’s pricing fluctuations and reactivity so closely. This is due to the smaller number of actual trades occurring in the South Australian energy market.
South Australia customers can choose their retailer and the type of contract. The Essential Services Commission of South Australia (ESCOSA) regulates standing contract prices for electricity customers who consume less than 160 MWh.
South Australia's network is operated and managed by ElectraNet. SA Power Networks owns and operates South Australia's electricity distribution network.
Residential customers in Tasmania are currently “non-contestable”, which means that they purchase electricity from Aurora Energy, on either a standard retail contract or a market retail contract. All small business customers using less than 50 megawatt hours (MWh) of electricity per year are currently also “non-contestable”, which means that they purchase electricity from Aurora Energy, on either a standard retail contract or a market retail contract.
Victoria has the most competitive electricity markets in the world, reinforced by strong consumer protections. Victoria’s electricity system is independently regulated and operates within the National Electricity Market. Victoria is the only state in Australia that has a fully deregulated energy market – government does not intervene in pricing and in 2009 removed the retail pricing cap.
Victoria’s network regions are Jemena, City Power, Powercor Australia, SP Ausnet, and United Energy Distribution.
Western Australia is a completely separate energy market and is not part of the NEM. The South West Interconnected System (SWIS) is centred on the city of Perth and stretches north to Kalbarri, east to Kalgoorlie and south to Albany. This system represents 90% of WA’s power market. The North West Interconnected System (NWIS) is a smaller network in the Western Australian Energy Market (WAEM) that operates in the upper north-west of the state including Port Hedland.