This report seeks to assess how well the National Electricity Market serves the long term interests of Australian consumers by considering in detail these two issues: What does “the long term interests of consumers” mean? How well is the National Electricity Market performing when measured against a series of criteria that might reasonably be applied to the National Electricity Objective?
Drawing on this analysis, the report offers some observations on how the NEM and the NEO might be reformed to serve better the long term interests of consumers.
Reliable, affordable electricity supply is a key foundation of the prosperity and quality of life enjoyed in modern developed nations. Recognising the importance of electricity, Australian federal and state governments have over the past two decades created the National Electricity Market (NEM) with the stated objectives of developing and operating electricity supply infrastructure to facilitate low-cost, safe, reliable and efficient electricity supply. The objective of the NEM is explicitly stated in the National Electricity Law as the “National Electricity Objective” (or “NEO”):
s. 7—National electricity objective
The objective of this Law is 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—
(a) price, quality, safety, reliability and security of supply of electricity; and
(b) the reliability, safety and security of the national electricity system.
Having such an explicit objective invites the question of how well this objective is being met. However, this simple question is surprisingly difficult to answer for three reasons. Firstly, the objective is not clearly defined. The limited set of criteria included in the NEO creates potential conflicts both with other relevant criteria which are excluded and with the broader “long term interests of consumers”. Secondly, there is very limited reliable and consistent data available across the range of criteria to measure the NEM’s performance in pursuit of its objective. Thirdly, the NEO sits within a broader set of Australian energy policy objectives that impact on the electricity sector, through policies and measures that are ‘external’ the NEO and the National Electricity Market (see Section 3.2.2).
This raises the question of whether it is efficient and effective for the “interests of consumers” to be so divided between included and excluded criteria, and for the aims of the electricity market to be split between internal and external drivers.
About this report
This report was prepared by the Institute for Sustainable Futures, UTS and Monash University Faculty of Law
for the Total Environment Centre Inc.
Funded by the Consumer Advocacy Panel