Electricity Wholesale Market Monitoring to Increase

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Electricity Wholesale Market Monitoring to Increase

In a Nutshell

Wholesale Markets will be put under further scrutiny by the AER in order to increase competition and transparency. 

The National Electricity (South Australia) (Australian Energy Regulator – Wholesale Market Monitoring) Amendment Act 2016 No 56 of 2016 (SA) (the Act) was assented to on 8 December 2016. This Act will amend the National Electricity (South Australia) Act 1996 (SA), to confer on the Australian Energy Regulator (AER) further ability to monitor and report on the wholesale market.

Objectives

This legislation targets market participants who supply electricity services through the ‘wholesale exchange’ operated and administered by the Australian Energy Market Operator (AEMO).

The Act intends to strengthen the competitive nature of the wholesale electricity market, which presently is seen to have many barriers to entry and considered to be detrimental to the long-term interest of consumers. The AER will be required to systematically monitor and report on the operation of the wholesale electricity market, specifically relating to effective competition and the conduct of participants around offers and prices within the market. The AER findings are to include any features that may impact the function of or detrimentally affect the competition of the wholesale market.

The AER is expected to report directly to the Energy Ministers, and to publish its reports on the AER website every 2 years (eventually covering a 5 year monitoring period). These measures are expected to create transparency for relevant stakeholders such as policy and rule makers, regulators and consumers. It is also expected to propel the discussion and creation of any necessary legislative responses in order to achieve the national electricity objective as set out in the National Electricity Legislation (NEL), which 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 -

  1. price, quality, safety, reliability and security of supply of electricity; and
  2. the reliability, safety and security of the national electricity system."

Powers to Obtain Information

The AER is to primarily access and use publicly available information to identify any relevant matter that relates to the AER’s functions of monitoring and reporting.[1] Once a relevant matter has been identified in accordance with s 18C (1), further provisions are enlivened, allowing the AER to access confidential information directly from wholesale electricity suppliers. Section 18C (1) of the Act requires the AER to identify and analyse the performance of wholesale markets with respect to whether:

  1. There is effective competition within the market;
  2. There are features of the market that may be detrimental to effective competition within the market; and
  3. There are features of the market that may be impacting detrimentally on the efficient functioning of the market.

The section gives broad powers to the AER to make inquiries and access confidential supplier information. Furthermore, the Second Reading Speech of the Act, expressly states that the AER is ‘not limited by [these] specified criteria’, implying that the AER can also have regard to other matters as it considers relevant.

Confidentiality

Provisions have been included to protect confidential information provided by wholesale market participants. S 18D(3) limits the use of the confidential information procured by the AER to the AER’s function of monitoring and reporting, while s 18D(4) prohibits the disclosure of the confidential information.

However, these protections are limited. If there is disclosure of confidential information, but it is ‘combined or arranged with other information so that it does not reveal any confidential aspects of the confidential supplier information or identify the…supplier to whom the information related’,[2] the AER will not be in breach of the provision. Further, the AER will not be liable for the release of confidential information if it can prove that it ‘reasonably believed that the information was not confidential’, or believed the information to be ‘sufficiently aggregated’.[3]

Market participants should, accordingly, proceed with caution in releasing confidential information to the AER.

[1] National Electricity (South Australia) (Australian Energy Regulator – Wholesale Market Monitoring) Amendment Act 2016 (SA) (the Act), s 18D (1)(a).

[2] The Act (2016), S 18D(4).

[3] The Act (2016), s 18E.

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This Alert is intended as an alert only. It does not purport to be comprehensive advice. Readers should seek professional advice before acting in relation to these matters.