The Australian Energy Market Commission (AEMC) today published the First Interim Report on its Review of Energy Market Frameworks in Light of Climate Change Policies.

The report’s preliminary conclusion is that existing market rules and regulations are generally robust and capable of handling the stresses likely to be caused by the Australian Government’s Carbon Pollution Reduction Scheme (CPRS) and expanded Renewable Energy Target (RET).

AEMC Chairman, Dr John Tamblyn, said competitive energy markets continue to provide the most effective means of responding to changing economic and policy circumstances – as long as they are supported by a strong framework of rules and regulations.

“Our 1st Interim Report has concluded that a number of issues raised by our initial scoping paper are not material to the ongoing ability of energy markets to deliver efficient outcomes for consumers in the short and long term.

“However, it identifies several areas of risk where changes to market frameworks may be required to ensure the ongoing efficiency, reliability and security of energy supplies after the CPRS and RET are introduced.

“The next stage of the Review will assess public submissions on the implications of these issues and make recommendations in June 2009 (Second Interim Report) on potential mitigation measures for the issues that have been identified,” Dr Tamblyn said.

“In particular, we found that the proposed CPRS is likely to create risks in relation to the regulation of energy retailing” Dr Tamblyn said.

“Our Report also identifies the possibility of a reserve shortfall in the short term due to the lead time required to build new generation capacity after a period of policy uncertainty. It also concludes that there may be a need to re-examine the current ‘tool kit’ available to the system operator to deal with any such capacity shortfall.

“We also believe that the expanded national RET is likely to place substantial stresses on the current market arrangements for new generation connection to transmission networks, and that the RET may potentially lead to additional network congestion on electricity transmission networks,” he said.

“This will be an area for further analysis in the next stage of the review,” Dr Tamblyn said.

Submissions on the 1st Interim Report are due 20 February 2009.

For further information contact:
AEMC Chairman, Dr John Tamblyn 02 8296 7800 or
AEMC Communications Manager, Prue Anderson 02 8296 7800 or 0404 821 935