General Information

Electricity Industry Structure Before Reform

Before the Government’s energy reforms, there was one entity, Pacific Power, which held all of New South Wales’ generating capacity and also held the State’s transmission assets. 

There were twenty-five electricity distributors.  They ranged in size from Sydney Electricity which had annual electricity sales of 16,000 GWh and over 1 million customers, to Tenterfield which had sales of 20 GWh a year and 2,400 customers. 

Fourteen distributors had less than 1% of the State’s electricity sales each.

NSW was also entitled to 57% of the output of the Snowy Mountains Hydro Electric Authority.  Pacific Power managed this entitlement.

Reform Objectives

Reform of the NSW electricity industry commenced in May 1995.  The Treasurer laid out the blueprint for reform in the Electricity Reform Statement.  The aims of the Government’s reform strategy were:

·         To promote the interests of consumers in New South Wales, through the provision of low cost and safe electricity at a high level of reliability;

·         To recognise the major impact that the electricity industry has on the environment and ensure that the reforms maximise environmental outcomes, support environmentally friendly technologies and promote energy efficiency; and

·         To reduce the costs of electricity production through market based incentives rather than via heavy handed government regulation. This requires that the industry structure gives wholesale and retail customers in New South Wales real choices between competing suppliers and having market arrangements that are consistent with and support the development of the national markets.

Structural Reform

Industry structural reform involved the separation of transmission from electricity generation, the disaggregation of electricity generation from a single entity into three competing entities, amalgamation of twenty-five electricity distributors into six electricity distributors and the functional separation of electricity distribution from the retail supply of electricity.  Structural reform was completed in March 1996 when the new entities were corporatised as State owned corporations under the Energy Services Corporations Act 1995.  Later, Eraring Energy was separated from Pacific Power and three electricity distributors (Advance Energy, Great Southern Energy and NorthPower) were amalgamated to form Country Energy.

An interim state wholesale market was established in May 1996 into which the three competing generators would bid their production.  The interim state wholesale market ceased when the National Electricity Market commenced in November 1998.  The National Electricity Market consists of the Australian Capital Territory, New South Wales, Queensland, South Australia and Victoria.

Environmental Reforms

In March 1996, the Government established the Sustainable Energy Development Authority (SEDA) which has the charter to reduce the level of greenhouse gas emissions in NSW by promoting investment in the commercialisation and use of sustainable energy technologies.

Customers can now nominate with their retail supplier to have a proportion of their energy generated from sustainable sources such as hydro, wind power, solar or bagasse.  The Green Power initiative was implemented by SEDA.

Retail Competition

Retail competition in electricity supply was introduced through a phased implementation commencing in October 1996.  Initially only a small number of large industrial customers were able to choose their retail supplier.  By 1998, approximately half of the State’s electricity purchases were made through the competitive retail market.  From January 2002, all NSW customers have the choice of retail supplier.

Transition to Full Electricity Competition

In addition to the four State-owned retail suppliers there are approximately 17 other suppliers licensed to sell electricity in NSW.  The Independent Pricing and Regulatory Tribunal (IPART) administers the licensing regime.

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Customer Protection

Prior to January 2002, for those customers who did not have a choice of retail supplier, retail prices were regulated by IPART.  IPART continues to regulate prices for those customers who have not entered the competitive retail market.  Under the Government’s reform, electricity transmission and distribution remain monopoly services.  IPART regulates distribution network prices and the Australian Competition and Consumer Commission regulates transmission prices.

There are a number of consumer protection measures incorporated into the Electricity Supply Act 1995 and regulations made under that Act to protect customers who negotiate the terms and conditions of their electricity supply and protect those customers who remain on standard terms and conditions.  There is a Marketing Code of Conduct that retail suppliers must comply with when marketing to customers.  Residential customers and some small business customers also have free access to the Energy and Water Ombudsman NSW to resolve disputes that cannot be settled through retailers’ own dispute resolution processes.

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