Issue date
AER reference
NR 005/06

The Australian Energy Regulator today issued a decision to publish indicators of the impact of transmission network congestion on electricity markets. The decision is accompanied by data for the 2003/04 financial year.

"The impact of transmission network congestion on electricity prices has been a key issue since the commencement of the National Electricity Market", AER Chairman, Mr Steve Edwell, said. "The AER, with the assistance of industry and NEMMCO, has developed a number of indicators to measure this impact.

"This is the first time that indicators of the market impact of transmission congestion have been developed in Australia or in any other country. The indicators will help industry, policy makers and the AER understand the economic costs of transmission congestion and to identify measures to reduce those costs.

"The indicators show total congestion costs in the NEM of $36 million in 2003/04. Given turnover in the electricity market for the same period was $6 billion this would indicate that the cost of congestion is relatively low. However, caution should be exercised before reaching conclusions on the basis of a single year's data. It is only by monitoring the impacts over time that any clear indication of the costs of transmission congestion can be reached.

"At the moment transmission network service providers have limited incentives to minimise the cost of transmission congestion to the market. The service providers incur the costs associated with improvements, but retailers, generators and end users gain the benefits.

"The AER will use the information in this and future reports to review the case for new or revised service standards incentives. The AER intends to commence its review early in 2007", Mr Edwell said.

The AER's decision follows an extensive public consultation process, and detailed work with two working groups, one with industry and user representatives, and the other with NEMMCO.

The information issued today will be followed by information for 2004-2005 and 2005-2006 in September 2006. The AER will then publish the indicators on a weekly basis.