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 - energy industry reform

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 networksthrough 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.

In 2004 and 2005, a second series of reforms to NEM institutions and the legal framework took place to implement the MCE’s response to the 2002 Parer Review for COAG. NECA was abolished and replaced by two new bodies. The Australian Energy Market Commission (AEMC) was established and given powers under the NEL as the market development and rule maker. A specialist energy regulator, the Australian Energy Regulatory (AER) was established as part of the ACCC. The AER was initially responsible for monitoring and enforcing compliance with the NEL and NER and for the economic regulation on electricity and gas transmission networks. These economic regulatory functions were extended to distribution networks from 1 January 2008 and gas distribution networks from 1 July 2008. At the same time a new decision framework was implemented under the National Electricity Rules for the economic regulation of electricity distribution networks. The AER must apply and work within that framework when making decisions with respect to Ausgrid’s distribution network revenue and pricing.

All these reforms were introduced to increase efficiency and encourage competition and innovation. For customers, this means lower prices and better service.

NEM institutions

Other institutions and regulatory authorities

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.