At the 2017 Energy in WA Conference on 23 August 2017, the Hon Ben Wyatt MLA, Minister for Energy, announced several electricity sector reform initiatives involving work to be completed by the Department of Treasury, Public Utilities Office. The initiatives announced are briefly outlined below.
The Public Utilities Office is currently developing a detailed work program, including a timeline of deliverables, to progress these reform initiatives. Detailed information on the work program for each initiative will be released in early October 2017, including further advice about planned stakeholder consultation and involvement.
The Public Utilities Office is to begin the required work to implement a constrained network access model for Western Power’s electricity network in the South West Interconnected System.
The main focus of implementing a constrained network access model will be to allow new generators to connect to the network without the substantial cost and delays currently being experienced. It will also involve providing a better regulatory framework for Western Power to make investment decisions that ensure customers only pay for investments that support the effective delivery of network services at the lowest possible cost.
Implementation of this initiative will be achieved through retention of the existing Western Australian regulatory framework under the Electricity Networks Access Code 2004 (Access Code). The local framework will be overhauled to implement a constrained network access model. Changes to the Access Code will also include examining whether Western Power’s economic regulatory framework should be updated to reflect best practice developments in the national regulatory framework.
This work will include consideration of appropriately transitioning Western Power’s existing network access contracts with generators and retailers to operate under a constrained network access model, and managing the potential impact on them. Consideration will also be given to managing the potential impact on participants in the Reserve Capacity Mechanism, including the allocation of reserve capacity credits and related requirements to ensure a smooth transition to the new arrangements.
It is anticipated that the implementation of the new arrangements will require the development of multiple regulatory instruments, including legislation, a revised Access Code, consequential and complementary changes to the Wholesale Electricity Market Rules and other subsidiary instruments as required.
The Minister for Energy has indicated his intention to introduce relevant legislation into the Western Australian Parliament in mid 2018. Implementation of changes to the Access Code and other regulatory instruments will need to be sequenced once the legislation is in place.
Changes to the network access regulation model for the Western Power network will require consequential and complementary changes to the Wholesale Electricity Market, including a new generator dispatch tool to be designed and implemented by the Australian Energy Market Operator.
Regulatory changes to facilitate the reforms will largely be progressed through amendments to the Wholesale Electricity Market Rules, developed by the Public Utilities Office with assistance from the Australian Energy Market Operator, and considered through the independent Rule Change Panel process.
The former Government announced its intention to introduce a capacity auction either in 2021 or at the time excess capacity reaches 5-6%, whichever occurs first. To avoid uncertainty for market participants, the Minister for Energy announced that the Government will not implement a capacity auction before 2021.
In the meantime, the Public Utilities Office will develop advice on a new model for capacity pricing. This work will examine the suitability of implementing an auction to determine capacity pricing, as well as other appropriate alternative pricing arrangements.
Any new capacity pricing arrangements to be considered must be fit-for-purpose, cost effective, and based on a more dynamic and responsive pricing mechanism to ensure electricity consumers do not pay more than necessary for sufficient capacity to meet reliability requirements for the electricity system.
The Public Utilities Office will develop this advice in consultation with industry.
Consistent with the Minister for Energy’s announcement on 9 August 2017, the Western Australian Government intends to implement a light handed regulatory regime to facilitate fair and reasonable access by third parties to Horizon Power’s network in the North West Interconnected System.
The focus of this reform initiative is to implement a fit for purpose regulatory regime that can deliver better outcomes for electricity consumers in the Pilbara region and assist in driving regional development.
The Public Utilities Office has been requested to prepare a detailed proposal on the design of a new regulatory framework and associated arrangements for an independent system operator by February 2018.
The reform proposal and implementation plan is to be developed by the Public Utilities Office through extensive stakeholder engagement and consultation.
Last reviewed: 21 September 2017