Regulatory framework

Ausgrid is one of three electricity distribution networks operating within a defined area of NSW. Each is required to comply with various Acts, regulations and licences governing the electricity industry.

Overview - historical context

The electricity industry has undergone significant reform over the last 15 years. In the early 1990s, each state and territory operated vertically integrated utilities with little interconnection between electricity grids in different jurisdictions. This led to inefficiencies and higher prices for some users. Recognising the potential benefits of introducing competition, the Council of Australian Governments (CoAG) agreed to reforms aimed at creating a fully competitive National Electricity Market (NEM). Core to the NEM was the establishment of a wholesale electricity market and interconnected electricity grid.

In order to facilitate the creation of a wholesale NEM and competition in the retail sector, the vertically integrated state authorities were separated into generation, transmission and distribution/retail supply businesses and corporatised. Ausgrid, as a combined distributor and retailer, was corporatised in 1996. Governments also developed a system of third party access to distribution and transmission networks through State Market Codes and then the National Electricity Code (NEC). The NEC was designed to govern market operations, power system security, technical standards and third party access to networks and was accepted as an industry access undertaking.

During 1996 state wholesale markets were established in NSW and Victoria and limited competition was introduced into the retail sector for very large customers. In late 1998, the National Electricity Market officially commenced under the National Electricity Law and NEC and two NEM bodies were established; National Electricity Market Management Co Ltd (NEMMCO) was set up to manage power system security and the operation of the wholesale energy market; the National Electricity Code Administrator (NECA) was established to administer and enforce the Code. In 2004, the Australian Energy Market Agreement (AEMA) was signed through the Coalition of Australian Governments. Under the AEMA, the Ministerial Council on Energy (MCE) was recognised as the national policy and governance body for the Australian energy market including for electricity and gas and is responsible for the national energy policy framework, the governance and institutional arrangements for the Australian energy market and has policy oversight of and sets future strategic directions for that market. 

Current regulatory framework

In 2005, the National Electricity Market (NEM) institutions and legal framework were substantially reformed through amendments to the National Electricity Law (NEL).The National Electricity Law (NEL) sets out the regulatory framework governing electricity networks in the National Electricity Market (NEM). The National Electricity Rules (NER) is made under the NEL and govern the operation of the NEM.

These amendments included the conversion of the National Electricity Code which governed the operation of the NEM and access to distribution and transmission networks into National Electricity Rules (NER or rules) and the establishment of the Australian Energy Market Commission as the body responsible for making rules and market development. The Australian Energy Regulator (AER) was also established to monitor and enforce compliance with the Rules and to be responsible for economic regulation of distribution and transmission networks. 

With these amendments, responsibility for regulating Ausgrid (as a network service provider) was transferred from IPART in NSW and the ACCC for its transmission network, to the AER, from January 2008.

In addition to these two primary institutions, there are also a number of institutions/regulatory authorities that have a role and /or an impact on Ausgrid’s operations. These institutions are:

  • The COAG Energy Council
    A COAG council of Federal and State ministers that sets and implements policy agenda for energy market reforms in Australia. 
  • Australian Energy Market Operator (AEMO) (formerly NEMMCO)
    Responsible for system security in the NEM and pperates the wholesale spot market for electricity and the wholesale gas markets.
  • Independent Pricing and Regulatory Tribunal (IPART) 
    The NSW jurisdictional regulator for network technical and safety licensing.
  • The NSW Department of Trade and Investment, Regional Infrastructure and Services (known as NSW Trade & Investment)
    The NSW government department responsible for setting NSW energy policy including licence conditions, contestability requirements and reporting.
    Customer Protection and Contracts under the Electricity Supply Act and Electricity Supply (General) Regulation.
    Monitoring of Network performance and safety as part of licensing regime and network management regime under the Electricity Supply Act and the Electricity Supply (Safety and Network Management) Regulation. 
  • WorkCover NSW
    Monitors the safety of Ausgrid’s work places under the NSW Work Health and Safety Act and Regulations.
  • NSW Office of Fair Trading
    Monitoring the safety of customer electrical installations under the Electricity (Consumer Safety) Act and Electricity (Consumer Safety) Regulation and authorising accredited service providers under the Electricity Supply Act and Electricity Supply (General) Regulation.
  • NSW Department of Planning and Environment
    Environmental assessment of Ausgrid’s capital work proposals under the Environmental Planning and Assessment Act, 1979 and relevant planning instruments. It should also be noted that local councils have a role in the environmental assessment of a limited number of Ausgrid’s capital work proposal.

You can view all the legislation referred to this table at the Australian Legal Information Institute (AustLII) website, a joint facility of the UTS and UNSW Faculties of Law.