For the first time in Australia’s history, a collaboration of six industry bodies from both the electricity and gas markets merged in 2009 to create the Australian Energy Market Operator- AEMO. Focusing on the amalgamation of the energy services, AEMO is attuned to the changing needs of our growing population by involving multiple states, jurisdictions and communities and by delivering an array of gas and electricity market, operational and planning functions.
AEMO consists of the following six founding entities:
- National Electricity Market Management Company (NEMMCO)
- Victorian Energy Networks Corporation (VENCorp)
- Electricity Supply industry Planning Council (ESIPC)
- Retail Energy Market Company (REMCO)
- Gas Market Company (GMC)
- Gas Retail Market Operator (GRMO)
AEMO draws together the functions carried out by these organisations, incorporating management of the National Electricity Market (NEM) and the retail and wholesale gas markets of eastern and southern Australia and oversees system security of the NEM electricity grid and the Victorian gas transmission network. In addition, AEMO is responsible for national transmission planning and the establishment of a Short Term Trading Market for gas.
AEMO was established by the Council of Australian Governments (COAG) and developed under the guidance of the Ministerial Council on Energy (MCE), AEMO is run by a skills-based board of nine non-Executive Directors and the Chief Executive Officer.
GOVERNANCE
AEMO is incorporated as a company limited by guarantee under the Corporations Act.
The ownership of AEMO is comprised of 60% government members and 40% industry members.
AEMO operates under the governance of a Board comprised of nine skills-based non-Executive Directors and the Chief Executive Officer.
The Board’s responsibilities include but are not limited to:
- oversight of the Company’s activities to achieve the objectives set out in the Constitution;
- setting the Company’s goals and strategy;
- determining the financial, operational, human, technological and administrative resources required by the Company to meet its objectives and goals;
- establishing and maintaining adequate and effective reporting lines and procedures, which enable all material matters and information to be identified and reported to the Board;
- approving Company budgets and monitoring compliance with financial reporting obligations;
- appointing the Managing Director;
- reviewing and assessing the performance of the Company’s management;
- establishing and approving the charters of Board Committees;
- establishing effective controls and procedures to enable risks to the Company to be identified, assessed and managed;
- monitoring compliance with legislative and regulatory requirements including occupational health and safety, equal opportunity, environmental, corporate governance and reporting obligations; and
- reporting to stakeholders of the Company.
The day-to-day management of the Company will be delegated to the Managing Director with support from Board Committees as appropriate. These delegations are documented.
AEMO operates within a broader market governance structure alongside the Australian Energy Market Commission (AEMC) and the Australian Energy Regulator (AER). The AEMC determines the policy environment and governance structures that shape the development of Australia’s energy markets and which set the operating requirements and obligations of market participants. The AER oversees economic regulation and compliance with the National Electricity Law and Rules and the National Gas Law and Rules. The AEMC is responsible to the Council of Australian Governments (COAG) through the MCE, while the AER is accountable to the Commonwealth Government as a constituent entity of the Australian Competition and Consumer Commission (ACCC).
For documents relating to specific areas of corporate governance, please click here >>
HISTORY
Changes in energy supply deregulation and privatisation of state owned assets has led most Australian states to adopt market based systems to extract, generate, transmit and distribute gas and electricity.
Since 1998 the generation, distribution and supply of electricity in eastern and southern Australian states has been amalgamated under the NEM.
A variety of more privately managed gas markets have existed for many years in south eastern Australia, including a wholesale short term trading market for natural gas in Victoria and Tasmania. In September 2010 another wholesale Short Term Trading Market (STTM) linking the South Australian and New South Wales gas hubs was established, with a Queensland hub being added later in 2011.
Until recently each market was separately planned and operated by a range of entities including NEMMCO, VENCorp, ESIPC, REMCO, GMC and GMRO. Over recent years increasing convergence of markets in the form of gas fired electricity generation has driven the need to establish a single operator that can oversee and integrate convergent infrastructure planning and trading activities across the different type of transmission systems.
With AEMO’s establishment in 2009, Australia became one of the first countries in the world to establish highly competitive and transparent gas and electricity markets underpinned by strong governance structures.
While individual energy markets remain separate with their own participants and jurisdictions, evolution in market operations can now build on the consistent framework of operational rules and underlying systems to ensure maximum efficiency, combined with maximum integrity or energy resource development.
ENERGY MARKETS
The energy markets operated by AEMO are the National Electricity Market (NEM), National gas market (which currently includes the gas Bulletin Board but is expanding to include Short Term Trading Markets in some states), the Victorian Wholesale Gas Market and Retail Gas Markets in Victoria, New South Wales and South Australia. Each of these energy markets operates under its own set of rules and involves different sets of participants.
Wholesale electricity and gas markets operate as short term trading links between producers and consumers, while retail gas markets operate to fulfil contractual arrangements based on metered flows at supply inputs and retail outlets.
The NEM began operations in December 1998 and is based on a pooled exchange between electricity producers and consumers where the output from all generators is aggregated and scheduled to meet current levels of demand.
A national wholesale gas market platform was established when the Short Term Trading Market began operations in September 2010. This links hubs in New South Wales and South Australia and operates alongside Victoria’s established Wholesale Gas market, with the potential to link all state based hubs in the longer term.
Further information is included below on the:
National Electricity Market
The National Electricity Market operates the world’s largest interconnected power system that runs for more than 5,000 kilometres from Port Douglas in Queensland to Port Lincoln in South Australia and supplies more than $10 billion of electricity annually to meet the demand of more than 8 million end users.
The NEM facilitates exchange between electricity producers and consumers through a pooled system where output from all generators is aggregated and scheduled to meet consumer demand. This allows for sophisticated pricing structures and load shedding arrangements that ensure security of supply despite large fluctuations in consumer demand.
NEM infrastructure is comprised of both state and privately owned assets, and is managed by a variety of entities under the overall direction of AEMO. Metering and financial transactions are facilitated by highly sophisticated technology systems that balance supply with demand, maintain reserve requirements, select which components of the power system operate at any one time, determine the spot price and facilitate financial settlement of the physical market.
The NEM interconnects five regional market jurisdictions (Queensland, New South Wales, Victoria, South Australia and Tasmania) whose cooperation under the NEM is secured through Commonwealth legislation and MOUs.
Victorian Gas Market
Most Australian gas markets are based on bilateral arrangements between producers, major users and retailers linked together through pipeline hubs connecting gas fields to gas consumers.
The exception is Victoria where a wholesale gas market was established in 1999 to enable competitive, dynamic trading based on injections into and withdrawals from the transmission system that links multiple producers, major users and retailers. After a review of the market four-hourly trading intervals were introduced in 2003 .
Short Term Trading Market
The Short Term Trading Market (STTM) is a wholesale market designed to facilitate short term gas trading using market driven short term (daily) prices. The STTM is operating initially in the New South Wales and South Australian hubs, with the objective of expanding to other state-based hubs (the transfer points through which gas is transmitted via pipelines and facilities and delivered to the distribution networks). A Queensland hub will be in operation late in 2011.
The STTM operates in conjunction with existing underlying gas supply, transportation and network contracts. The physical operation of pipeline and network assets is maintained by owners of the infrastructure.
The existing New South Wales and South Australian retail gas markets are operating in conjunction with the STTM in each state, and the Victorian wholesale gas market is running in parallel with the emerging national gas market.
