Regulator publishes fifth annual report on energy sector

The Australian Energy Regulator today published its fifth State of the energy market report. The report provides a comprehensive overview of Australia’s electricity and gas markets over the past 12 to 18 months.

“We are seeing continued dynamic growth in the gas market, with an escalation of coal seam gas projects in Queensland and New South Wales,” AER Chairman, Mr Andrew Reeves said.

“A new short term trading market in Sydney and Adelaide is improving competition in wholesale gas markets. The market was extended to Brisbane this month.”

In electricity, the wholesale spot market delivered significantly lower average prices. There was also strong investment in electricity networks to meet higher peak energy demand, stricter reliability and safety standards, the replacement of ageing equipment and higher debt costs.

“These investments are ensuring a more reliable energy supply, but the costs are flowing through to consumers through higher retail prices,” Mr Reeves said.

“The Rules for setting network charges are making some price increases unnecessarily high. The AER in 2011 has taken a leading role in seeking to address this issue.”

Mr Reeves said that benign weather had helped to reduce average spot prices for wholesale electricity. But there was also more volatility, including both very high prices and a record number of negative prices (generators sometimes make negative price offers to keep their plant operating).

“This volatility was sometimes caused by strategic bidding rather than reflecting an efficient market at work. Excessive volatility may discourage smaller businesses from entering the market, which affects competition and may increase prices in the future.” Mr Reeves said.

The State of the energy market is intended to meet the needs of a wide audience, including government, industry and the broader community. The report supplements the AER’s extensive technical and compliance reporting on the energy sector.

The Australian Energy Regulator is Australia’s national energy market regulator and an independent statutory authority. The AER is funded by the Commonwealth, with staff, resources and facilities, provided through the Australian Competition and Consumer Commission.

Issued date: 
14 December 2011
AER reference: 
NR 018/11
Duncan Harrod, Media unit (02) 6243 1108 0408 995 408
Infocentre general enquiries 1300 302 502