Market Review: Completed
Overview
This ground-breaking review put consumers in the driving seat.
Power of Choice is all about opportunities for consumers to make informed choices about how they use energy; and incentives for efficient investment so community demand for energy services can be met by the lowest cost combination of demand and supply options.
Effectively managing energy demand contributes to reducing the cost of supply. A shift in use away from peak periods or a general reduction in consumption can delay investment in generation and networks (poles and wires), reducing overall cost and ultimately lowering prices for everyone.
The review found that:
- consumers need clear signals about the cost of their energy consumption to manage their demand; and supply chain businesses need appropriate incentives to implement and facilitate demand side participation options
- consumers need a range of information so they can identify and implement efficient demand options
- technologies and skills are need to support pricing, information and demand management options, and to enable consumers to effectively respond to market signals.
The Power of Choice reforms include:
- removing networks' effective metering monopoly to enable a 'market led' rollout of smart meters and services
- introducing cost reflective network pricing
- improving customer access to information about their energy consumption
- recommendations to make it easier for consumers to switch retailers
- allowing the market operator access to better demand side participation information.
The final report and proposed implementation plan were provided to Standing Council on Energy and Resources (SCER), formerly MCE, for its consideration on 30 November 2012.
Background
On 29 March 2011 the Ministerial Council on Energy (MCE) directed the AEMC to undertake a further review into demand side participation (DSP) in the national electricity market. This Review is titled: Power of Choice - giving consumers options in the way they use electricity (formerly Stage 3 DSP Review).
The purpose of the review was to identify market and regulatory arrangements that would enable the participation of both supply and demand side options in achieving an economically efficient demand/supply balance in the electricity market.
The review was to have a broad focus that extends beyond the National Electricity Rules. In undertaking the review, the AEMC considered these key areas:
- market frameworks to maximise value to consumers from services enabled by new technologies, such as smart grids
- effectiveness of regulatory arrangements for energy efficiency
- efficient operation of price signals.
These key areas were considered along with any other matters that the AEMC considered relevant to the objective of the Review. Details of each of these areas for investigation can be found in the MCE's Terms of Reference, as outlined below.
The Review followed work already undertaken by the AEMC regarding DSP in the NEM.
Information Sheet - GeneralOn 6 September 2012 the AEMC published the draft report for the Power of choice review. The draft report set out the AEMC’s draft recommendations for supporting market conditions necessary to deliver efficient DSP.
We also published a number of consultancy reports that were used to guide some of the recommendations in the draft report.
On 21 December 2012 the AEMC published three background consultant research reports for the Power of choice review. These reports relate to:
- the opportunities for demand side participation (DSP) given the current nature of electricity use in the market (Ernst and Young)
- a stocktake and analysis of current DSP options available based on existing DSP and pilots and trails occurring across the market (Futura Consulting)
- Investigation of efficiency of current price signals in the NEM (PwC).
These reports formed input as appropriate to our directions paper.
On 15 July 2011 the AEMC published an issues paper for the Power of Choice Review. The issues paper outlined the approach and methodology we proposed to adopt in identifying the market conditions and market and regulatory arrangements needed across the electricity supply chain to facilitate the efficient investment in, operation and use of demand side participation (DSP) in the NEM. The paper also canvassed some of the issues for consideration in the review.
Stakeholder Reference Group
In accordance with the MCE Terms of Reference for this review, the Commission set up a Stakeholder Reference Group (SRG). The Terms of Reference for the SRG and its list of members are provided below. Synopses and presentations made at SRG meetings are provided below.
Erratum
Wording of footnote 232 on page 157 of Australian Energy Market Commission, Power of choice – giving consumers options in the way they use electricity, directions paper, AEMC, 23 March 2012 has been changed to the following:
EUAA, response to AEMC issues paper Power of choice – giving consumers options in the way they use electricity, submission to the AEMC page 9, 26 September 2011: In addition, none of the EUAA’s members reported direct contact from DNSPs seeking DSP capacity.