1 Electricity Market Review ( EMR ) Market Participant Consultation Group Briefing 10 th April 2014 Department of Finance
2 Overview The Case for Electricity Market Reform EMR Introduction Electricity Market Review Objectives EMR Process Overview EMR Principles Project Governance Structure Consultation Groups How Do You Participate in the EMR Process? Electricity Market Reform Options Key Milestones EMR Steering Committee and Project Office details Electricity Market Review
3 The Case for Electricity Market Reform Long term investment requirements Growing and unsustainable State Government subsidy Rising fuel costs Amongst the highest cost electricity in the OECD Government budget pressures Technological change Electricity Market Review
4 EMR Introduction The Electricity Market Review will be undertaken in two phases: Phase 1: o Assess the strengths and weaknesses of the current industry structure, market institutions and regulatory arrangements and examine the options for reform to better achieve the Review s Objectives. o The Terms of Reference for Phase 1 of the EMR are available on the Department of Finance website. Phase 2: o Detailed design of a set of selected reforms and implementation arrangements. Electricity Market Review
5 Electricity Market Review s Objectives Reducing costs of production and supply of electricity and electricity related services, without compromising safe and reliable supply. Reducing Government exposure to energy market risks, with a particular focus on having future generation built by the private sector without Government investment, underwriting or other financial support. Attracting to the electricity market private-sector participants that are of a scale and capitalisation sufficient to facilitate long-term stability and investment.
6 EMR Process Overview Terms of Reference Project Plan Information Paper Discussion Paper Public Submissions Stakeholder Engagement Ministerial options paper Process Stage Description Timing Terms of Reference Scope of the Review (Phase 1). Released (Department of Finance website) Project Establishment Plan Project Governance framework, Review process and means of stakeholder participation. Finalised by mid April (Department of Finance website) Information Paper Discussion Paper Public Submissions Stakeholder Engagement Ministerial Reform Options Paper Summary of key issues in WA electricity sector (SWIS). Release of Discussion Paper pertaining to issues facing the electricity market and reform options. The Discussion Paper s purpose is to facilitate interested parties to make Public Submissions. Interested parties submit Public Submissions using template available from Department of Finance website. Direct one-on-one consultation with selected stakeholders to obtain specialist technical and industry related input. Consulted Stakeholders draft a document containing reform option proposals, aligned to Review s Objectives, for the consideration of the EMR Steering Committee/Project Office. Outlines strengths and weaknesses of the electricity market and options for reform. Prepared by the Project Office and approved by the Steering Committee. Released in late April (Department of Finance website) Released in late June (to be published on Department of Finance website) Open: late June Close: late July Throughout end October 2014
7 Electricity Market Review Principles Key Principles The Review will be conducted in a highly interactive manner. Stakeholders will be responsible and empowered to provide their views either through a public submissions process or by direct consultation. The Review will maintain regular direct communications with key market participants and stakeholders throughout the Review process. Ensure a high level of stakeholder awareness of the Review process and means of participation is achieved. The EMR Steering Committee will determine the reform options put to the Minister for Energy for consideration. The EMR schedule is a critical part of the Review and manner in which it is conducted: Completion and delivery of Reform Options Paper to the Minister for Energy by 31 October Maintain impetus for reform and stakeholder participation.
8 Project Governance Structure Consultants and Advisors Minister for Energy Stakeholders Electricity Market Communication Market Processes EMR Steering Committee (Chair + 2 Members) Govt Departments Market participants Industry bodies Network Project Office (Project Director + 5 FTEs) Regulatory Bodies Consumers Wholesale Electricity Market Retail Electricity Market Institutional Arrangements Industry Structure Fuel Network access and regulatory model Market Participant Consultation Group Government Consultation Group Stakeholder Engagement Public Submissions Process
9 Consultation Groups Market Participant Consultation Group (MPCG) Membership based on expressions of interest (EOI). EOIs are open to all stakeholders and interested parties. EOI templates are available from the Department of Finance website. Meetings to take the form of facilitated workshops and briefings held on an as-needed basis. Meeting will generally include a progress update on the Review and a feedback session. Stakeholders are encouraged to provide their views via the Public Submissions process or by direct consultation. Government Consultation Group Membership based on invitation.
10 How Do You Participate in the EMR Process? Direct Consultation Consultation with select stakeholder to obtain specialist technical and industry related input. Public Submissions Process All stakeholders and interested parties will have the opportunity to provide input and propose options for reform. Stakeholder engagement meetings to occur over the course of the Review. Consulted stakeholders draft reform options submission, that address the EMR s Objectives, for the consideration of the Project Office. The Electricity Market Review Reform Options Paper Outlines strengths and weaknesses of the electricity market and options for reform Minister for Energy Public Submission process and template available by mid June. Discussion Paper (to be released late June) will facilitate stakeholders to make public submissions. The Discussion Paper covers issues facing the electricity market and options and the pros and cons of various options for reform.
11 Electricity Market Reform Options Market Design Industry Structure How do the particular characteristics of the SWIS impact on the operation and design of the market? Do any WEM market rule objectives contribute to unintended outcomes? Would an energy only market design better suit the WEM? Is the current retail/network tariff design appropriate for the future? What is the appropriate role of DSM? What is the cost of reliability and is it appropriate? Should WA keep its current market structure and just make a few changes? Or move to an energy only market? What is there to consider*? What are the barriers to entry to generation and retail markets? Does the current structure promote market power that impedes the EMR s Objectives? How many participants can the SWIS accommodate? What criteria assess the effectiveness of market institutions? Regulatory Regime How do the institutional arrangements in the Promote transparent, SWIS compare to other jurisdictions? competitive and efficient outcomes Regulatory Regime Is the network revenue cap regulatory model optimal for the SWIS? Is a constrained or unconstrained network access model optimal for the SWIS? Are network businesses incentivised to provide least cost network control services vs. network solutions? Should metering services be contestable? What are the merits of contestability thresholds? Potential changes to the Customer Transfer Code * This is not an exhaustive list. It has been included to provoke discussion on reform.
12 Key Milestones Milestone Launch of the Electricity Market Review Release of Terms of Reference* Timing Launched Released Release of Information Paper* Conduct first Market Participant Consultation Group briefing session EMR Steering Committee/Project Office contacts selected Stakeholders to confirm participation in Engagement meetings April Conduct Stakeholder Engagement meetings Throughout Release Discussion Paper* Call for Public Submissions* Due date for Public Submissions The Review delivers the Options Paper to the Minister late June late July 31 October *Refer to Department of Finance website (www.finance.wa.gov.au/publicutilitiesoffice).
13 EMR Steering Committee and Project Office Details Role Name Contact Information EMR Steering Committee Chair Paul Breslin p. (08) e. EMR Steering Committee Member Ray Challen p. (08) e. EMR Steering Committee Member Nicky Cusworth p. (08) e. EMR Project Director Simon Middleton p. (08) e.
14 Questions Building Management and Works