The Energy Regulation and Markets Review - Stikeman Elliott

Australia
While there remain jurisdictional differences in the structure and regulation of
the electricity industries in each Australian state and territory, all Australian states and
territories have now restructured their respective electricity industries, generally to:
a separate the electricity service providers into distinct generation, transmission,
distribution and retail supply entities;
b remove the responsibility for performing regulatory functions from the electricity
service providers; and
c introduce competition into the generation and retail supply sectors.
Under the NEL and NER, AEMO administers a spot market for the wholesale supply
and purchase of electricity, operated through a central pool. Generators make offers every
five minutes to supply the market with a set amount of electricity at a certain price. Based
on these offers, AEMO decides which generator is required to produce electricity to meet
the current demand at the best price. The selected generators are then dispatched into
production, and a dispatch price is set every five minutes. The spot price for each trading
interval is set by averaging the six dispatch prices given each half hour (in five-minute
intervals), within a maximum and minimum (floor) spot price. This is done for each
region in the NEM.
Gas
Victoria established a wholesale spot market in 1999 to manage gas flows on the Victorian
transmission system and to allow market participants to buy and sell gas at spot prices.
More recently, the National Gas Market Bulletin Board (‘the BB’) and short-term trading
markets in major hubs (Sydney, Adelaide and Brisbane) have also been established.
In the Victorian wholesale spot market, participants submit daily bids ranging
from $0 per gigajoule to $800 per gigajoule. Bids may be revised at designated scheduling
intervals during the day. At the beginning of each day, AEMO stacks supply offers and
selects the least-cost bid to match demand in the market (the clearing price). AEMO
can also schedule additional gas injections (typically liquefied natural gas or ‘LNG’) at
above-market price to alleviate short-term constraints. Approximately 10–20 per cent
of wholesale gas volume is traded on the spot market. The remaining gas is sourced via
contracts or vertical ownership between producers and retailers.
The short-term trading market was launched in September 2010 in Sydney and
Adelaide and was extended to Brisbane in December 2011. The hubs link transmission
pipelines and distribution systems. Each hub is scheduled and settled separately but
each operate under the same rules. The market sets a daily ex ante clearing price at each
hub, based on scheduled withdrawals and day-ahead offers by gas shippers to deliver gas.
Participants may buy some or all of their gas requirements on a spot basis.
The BB, which commenced in July 2008, is a single electronic communications
system (website) covering all major gas production fields, major demand centres and
natural gas transmission pipeline systems of South Australia, Victoria, Tasmania, NSW,
the ACT and Queensland.
The BB aims to facilitate trade in gas and capacity over the relevant pipeline
systems through the provision of real-time system and market information. It covers:
a supply-demand outlook (including forecast pipeline flows, capacity outlook and
linepack capacity adequacy);
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