Back on the reform horse Energy market reform has had a chequered history in Australia. Now, with Australia’s governments facing a substantial infrastructure investment task, and with growing cost of living pressures, governments will need to get back on the reform horse, writes Domini Stuart. At the start of the 1990s, Australia’s electricity utilities were largely single, vertically integrated units fully owned by state governments. The 1995 Competition Principles Agreement brought the states together in an undertaking to restructure the sector, apply competitive neutrality and review the regulation that restricts competition. They also agreed to separate transmission from generation activities, and to segregate the retail and distribution businesses. Southern and eastern states established the National Electricity Market (NEM) – a compulsory wholesale pool into which generators sell their electricity. While Western Australia and the Northern Territory are too distant and remote to be part of the network, the NEM remains the largest interconnected
power system in the world, with more than $11 billion of electricity traded annually, meeting the needs of around eight million end users. But while Australia has come a long way since the days of single, vertically integrated utilities under full government ownership, reform momentum has stalled – with significant differences remaining between the states in respect of the ownership, efficiency and overall energy sector performance. Just two NEM states have delivered on the agreement for wholesale privatisation. Victoria privatised generation, network and retail businesses between 1995 and 1997, while South Australia did the same between 2000 and 2001.
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