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New Energy Market
A new Wholesale Electricity Market (WEM) was established as part of the Western Australian Government’s reform of the way electricity is generated, distributed and retailed in Western Australia.
The WEM began operating - for the South-West Interconnected System or SWIS (the area bound by Kalbarri in the north, Kalgoorlie in the east, and Albany in the south) - in September 2006. The reform of the electricity market is designed to offer all consumers a choice of competitively-priced energy products and services, and to attract private investment into the market. This ‘deregulation’ is a process that is occurring in many parts of the world. In Western Australia the State’s electricity assets continue to be owned by the government.
As part of the process to achieve a competitive market, Western Australia’s primary electricity business, Western Power, was separated into four different businesses in April 2006.
These are:
Verve Energy
Verve Energy is a generation business producing electricity at power stations (from a variety of energy sources) and supplying this electricity to retailers through the WEM.
Synergy
Synergy is a retail business which purchases electricity from suppliers through the WEM and sells it to customers.
Western Power
Western Power is a networks business which retained the Western Power name, manages the distribution system, ie. ‘transports’ the electricity from the suppliers to customers.
Horizon Power
Horizon Power is a Regional business which is responsible for all of the functions of generating or procuring, transmitting and retailing electricity to customers outside of the SWIS.
The WEM is designed to allow competing generators to offer electricity into a market for sale to retailers who in turn purchase electricity for their customers.
There are other generators and retailers operating in WA and the WEM is expected to attract further entrants.
The State Government has also limited the capacity of Verve Energy as a way of encouraging other electricity generation companies and retailers to enter the market to buy and sell electricity.
What's new?
Electricity sales contracts: Verve Energy sells wholesale electricity to energy retailers and large consumers. Please call us if you wish to discuss your electricity supply with us.
As part of the electricity reform process, the State Government prescribed a contract, known as the Vesting Contract, whereby Verve Energy sells electricity to Synergy, the Electricity Retail Corporation.
How is power distributed?
The networks business, which retained the Western Power name, is responsible for ‘carrying’ electricity in the SWIS. It is a regulated monopoly and its network system is available to all generators and retailers to avoid unnecessary duplication of electricity wires.
An independent regulator, the Economic Regulation Authority (ERA) oversees the operations of the network business including revenue and performance. An Access Code, that ensures fair and equal access to the network, is administered by the ERA. The ERA also monitors market activities.
If there is more than one generator, who will determine the order in which electricity is despatched?
To operate and administer the new market, an Independent Market Operator (IMO) was established. Market Rules were developed to establish the structure and processes for the market. (More information is available on www.imowa.com.au; and www.era.wa.gov.au).
Each year, all energy generators will register the capacity they can commit to providing to the IMO. The capacity of a generator is the amount of energy it can produce at any one time. Generators are then paid for this capacity by retailers (and ultimately customers). The IMO is responsible for ensuring that there is always sufficient capacity available in the State to meet the needs of all customers.
The bulk of electricity is traded as contracts between generators and retailers. In addition, the Short Term Energy Market provides for day-ahead and ‘realtime’ trading.
The IMO arranges the orderly despatch of all the electricity traded and the System Operator, which is an independent operating arm of the network business, manages the despatch.
How do customers benefit from these changes?
Customers using more than 5.7kW or with an annual account of more than $8,000 have a choice of electricity providers.
The new retail business, Synergy, supplies electricity to all other customers (residential and small business) by purchasing an agreed amount of electricity from Verve Energy. Until the 5.7kW threshold is lowered and choice is extended to these customers, Synergy will be their only supplier.
Need more information?
If you would like more information on the State Government’s electricity reform program, please visit the Electricity Reform Implementation Unit Web site.