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4647.0 - Alternative View of Electricity and Gas Supply Activity , 2006-07 to 2007-08 Quality Declaration 
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 29/09/2009  First Issue
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TECHNICAL NOTE 1 OVERVIEW OF ELECTRICITY AND GAS MARKET REFORMS


INTRODUCTION

1 A period of market reform over the past two decades has created significant changes to electricity and gas business structures.


MARKET DIVERSIFICATION

2 A continuing trend has been the diversification of businesses. This has seen electricity supply businesses enter the gas supply market and, conversely, gas supply businesses enter the electricity supply market as opportunities expand within these markets. Diversification has also occurred geographically, allowing growth of businesses and diversified sources of risk and exposure to state wholesale markets(footnote 1) .

3 For more information on electricity and gas market reforms and their impact on ABS statistics, please see
Industry Background
in Chapters 2 and 3 of Electricity, Gas, Water and Sewerage Operations, Australia, 2006-07 (cat. no. 8226.0).


ELECTRICITY MARKET REFORMS

4 Since 1991, governments in Australia have been undertaking structural reform of the electricity market.

Chronology of key electricity industry reforms(a)(b)

Year Reform

1991 The Special Premiers’ Conference in 1991 established the National Grid Management Council to coordinate the development of the electricity industry in eastern and southern Australia (c). State owned utilities were disaggregated into separate generation, transmission, distribution and retail supply entities, corporatised and, in some jurisdictions, sold to the private sector.(c)
1994 The introduction of competitive wholesale and retail electricity markets resulted in trading across state borders.
1996 New South Wales, ACT, Queensland, Victoria and South Australia passed the National Electricity Law, and created the National Electricity Market (NEM).(d)
1998 Establishment of the NEM, linking the ACT, New South Wales, Victoria, South Australia, and Queensland, and later Queensland (2000-01), and Tasmania (2005-06).(c)
2007 Council of Australia Governments (COAG) established an industry funded Emerging Market Operator for both electricity and gas, replacing both the National Electricity Market Management Company (NEMMCO) and the gas market operators. Operational as from July 2009.

(a) While it was impractical for Western Australia to join the NEM, it was consistent with the other states in that it was historically dominated by a single, vertically integrated utility under government ownership. The Western Australian Government disaggregated the electricity utility Western Power Corporation into four separate, state-owned entities in 2006. Later that year, a wholesale electricity market was established.
(b) Given the scale of the Northern Territory Market, a ‘bilateral contracting’ system was reintroduced under which generators are responsible for dispatching the power their customers require. In 2000, the electricity market was open to competition. The introduction of full retail contestability is currently scheduled for 2010.
(c) Australian Bureau of Statistics (2008) Electricity, Gas, Water and Waste Services, Australia, 2006-07, ABS cat. no. 8226.0, ABS, Canberra.
(d) Australian Energy Regulator (2008), State of the Energy Market 2008.



GAS MARKET REFORMS

5 The current gas supply industry reflects the result of the restructuring which began in the early to mid 1990s.

Chronology of key gas industry reforms(a)

Year Reform

1990 - onwards Restructuring of the gas industry commenced. As in the electricity supply industry, vertically integrated businesses have formed separate business units to undertake various stages of distribution and other activities. Increased competition was introduced along the various stages of the distribution chain with the entry of new businesses.
1997 The 1997 National Gas Pipelines Access Agreement introduced full retail contestability (FRC) providing all gas users their choice of supplier.
2007 Queensland introduced FRC, with the result that now all states and territories, except the Northern Territory, permit customers to enter a supply contract with a retailer of their choice. Council of Australian Governments established the National Energy Market Operator (NEMO) in June 2009.

(a) Australian Bureau of Statistics (2008) Electricity, Gas, Water and Waste Services, Australia, 2006-07, ABS cat. No. 8826.0, ABS, Canberra (direct quotes)


1 Australian Energy Regulator (2008), State of the Energy Market 2008 <back

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