Australian Competition and Consumer Energy Commissioner, Mr Rod Shogren, has backed calls for clearer strategic direction for the national electricity market.
"The recent events in California have demonstrated that the risk of bad outcomes from not getting the policy settings right is very real", Mr Shogren told the Energy Regulation and the Role of Regulators conference in Melbourne today.
"The ACCC is concerned that current institutional arrangements in the electricity sector are failing to provide strategic direction in implementing changes to the code".
This is exemplified by the current code changes regarding network pricing.
"The ACCC is disappointed with the current situation where it is unable to fully consider the transmission network pricing issues in one complete application.
"Similar situations can be prevented in the future by establishing closer ties between NECA [National Electricity Code Administrator], the ACCC and NEMMCO [National Electricity Market Management Company] to provide greater coordination in the code change process.
"The ACCC is already pursuing talks with NECA for the purposes of obtaining a quick resolution to the network pricing issue".
However, Mr Shogren stated "better liaison between NECA, NEMMCO and the ACCC can only take us so far.
"If parties, especially the State/Territory jurisdictions, are unhappy with the development of the National Electricity Market then they must accept responsibility as the governments who established the framework for the NEM and the role of the NEM institutions. The fact that the State/Territory governments are accepting this responsibility by thinking anew about these issues is to be welcomed.
"We need to move towards a clearer delineation of roles and fewer government ownership issues to achieve simpler and less contentious arrangements".
Mr Shogren welcomes renewed interest by the State/Territory Governments in the overall objectives and institutional arrangements of the NEM.
"The ACCC has been calling, literally for years, for a reassertion of policy leadership at the governmental level in the development of the NEM".
He noted, however, that "nothing would be worse for investment than a fundamental reappraisal of market rules when they have not been given a chance to operate for any length of time".
While supporting governmental strategic oversight, Mr Shogren questioned governments’ intervention in the ongoing functioning of the NEM.
"In dealing with immediate problems, governments are likely to make decisions that protect their constituents from negative short-term impacts but which compromise the ability of the market to deliver long-term benefits.
"It is hard to be confident that policy makers will make decisions in the overall interests of the market, of competition, and thus of end-users, given that some jurisdictions continue to have vested interests in the market as owners of generation and retail businesses.
"As the California case demonstrated, if governments’ involvement in the development of the NEM actually stifles market development, partial deregulation is likely to be the worst of all worlds".