How is the National Electricity Market regulated?

Energy is an essential service, which is why laws and safeguards are in place to make sure your access to it is reliable, secure and affordable.

Before we get started, it’s important to note that there are a heap of acronyms at play here. We’ll do our best to explain it simply, but in short it means there are stringent regulations and frameworks in place to ensure your rights and needs are protected, and a safe, secure and reliable supply of energy is delivered when you flick on a light switch.

Most Australians get their power from the National Electricity Market (NEM). Generators sell electricity into this ‘spot market’, and retailers buy electricity to on-sell it to consumers. This is a highly competitive market, with more than 100 generators and retailers participating, and prices fluctuating in real-time in response to supply and demand – but it’s also highly regulated.

The obligations of the participants in the NEM are set out in the National Electricity Law (NEL). The key regulatory authorities that govern the NEM include:

  • The newly formed Energy Ministerial Regulatory Forum (EMRF) has replaced the Council of Australian Governments (COAG) Energy Council. The EMRF is made up of energy ministers from the Commonwealth, state and territory governments, and all of its meetings are ‘Cabinet in Confidence’, meaning the discussions are kept confidential. The EMRF doesn’t take part in the day-to-day operation of energy markets, but is responsible for monitoring and reforming these markets, promoting energy efficiency and productivity, driving cooperation between Commonwealth, state and territory governments and overseeing national electricity regulators.
  • The EMRF is part of the National Federation Reform Council (NFRC), which in May 2020 Prime Minister Scott Morrison announced would replace COAG.
  • The Australian Energy Market Commission (AEMC) is responsible for making and assessing proposals to amend the National Electricity Rules (NER) and National Energy Retail Rules (NERR). The AEMC is also responsible for advising governments on how energy markets should be developed responsibly.
  • The Energy Security Board (ESB) is tasked with providing system oversight for energy security and reliability.
  • The Australian Energy Regulator (AER) polices the system and monitors the market for rule compliance. This includes continuous monitoring of market prices and network constraints and outages, regular audits and – where a risk has been identified – targeted compliance reviews. When national energy laws are breached, the AER can respond by issuing an infringement notice (similar to an on-the-spot fine); seeking a court order; initiating civil proceedings; or even revoking a retailer’s right to sell energy. In the interest of transparency, the AER also publishes enforcement outcomes and compliance reports online.
  • The Australian Energy Market Operator (AEMO) manages the day-to-day operation of Australia’s energy markets and systems. When generators sell electricity into the market, they indicate how much electricity they’re prepared to sell, and at what price. It’s AEMO that accepts these offers. AEMO is responsible for maintaining the reliability and security of the NEM and carrying out the long-term planning required to develop Australia’s future energy system.

In addition to the NEM’s rules, states and territories also have their own electricity regulations that are governed by state or territory-specific legislation. The NEM doesn’t operate in Western Australia or the Northern Territory. In Western Australia, electricity is supplied by the Wholesale Electricity Market (WEM), which is also overseen by AEMO; and in the Northern Territory, it’s supplied by the Interim Northern Territory Electricity Market (I-NTEM), overseen by System Control (appointed by the Northern Territory government).

The supply and sale of electricity to retail customers is regulated by the National Energy Retail Rules (NERR), which are made by the AEMC under the National Energy Retail Law (NERL). These include rules protecting your right to choose between competing retailers, other energy-specific consumer protections, and model contract terms and conditions. Victoria hasn’t adopted the NERL, but similar legislation, including the Energy Retail Code, applies there.

If you think your energy retailer might have violated these regulations, you can take your concerns to your local energy ombudsman for a free, fair and independent dispute resolution.