Time to review governance of the energy system, not just AEMO

The capacity for the Collective of Energy Ministers* to commission reviews seems to have no bounds. The latest review – of AEMO’s governance arrangements – is yet another element of a piecemeal approach.

The review terms of reference were announced on 5February on the basis of a decision apparently made at the December 2025 meeting of the collective.  However, the communique fromthat meeting does not appear to include this decision (), which is reflective of how poor the overall governance arrangements are. More significantly, the Terms of Reference detail a set of changes that have occurred in the market over time but provide no compelling evidence of the problem that the review is trying to address.

The ToR explicitly exclude consideration of the overarching national energy governance framework and architecture.  This is an unsurprising decision given the extent to which the Collective now represents the ambitions of the bureaucrats in the various states to have as much freedom as possible in determining their energy policy, while still being able to blame the Commonwealth for any failing.

 Almost 100 years ago, Alex Gibson provided a report on PowerDevelopment in Australia that was tabled in the Commonwealth Parliament on 5 September 1929, during the industrial relations debate that led to the downfall of the Bruce Government. The timing seems to be the reason why there is no substantive Commonwealth action arising from the report.  The report observed that leading countries of the world were paying the closest attention to power development as electric power was the ‘basis of improved production and national prosperity and wealth.’  The report called for the ‘complete coordination’ of power development which included calls to create State Commissions in those states that did not already have one – especially NSW and Queensland.** It also recommended the Commonwealth establish an instrumentality which would work with the State Commissions to take control of hydro electric resources, to establish standards, to be responsible for interstate connections and trade, and to support the states and where it provides financial assistance take full responsibility.

 It took NSW another twenty years to establish its electricity commission; it took sixty years till any kind of entity was created at the Commonwealth level (through the formation of the collective). Just over a decade ago Michael Vertigan’s Review of Governance Arrangements forAustralian Energy Markets report included a review of governance of AEMO concluding that the governance arrangements should not change. The Vertigan review recommended that the Collective assess the requirements for another independent governance review in 2023. I have found no evidence of this assessment occurring. In the period between the Vertigan review and today the governance arrangements saw the crazy foray post Finkel into the Energy Security Board, an entity that achieved precisely nothing – its attempts at carbon policy (the NEG) coming to nothing and its post 2025 market design project having minimal impact.

The failure of Australian Energy Markets to deliver the outcomes businesses and households need can be traced to the very top of the governance structure. The operation of ‘uniform’ legislation enacted by the SA Parliament, and governance by the Collective is an inadequate. This was identified by me in a submission to the review of the statement of the energy objectives (NICE Submission FINAL.pdf). That submission called on the Commonwealth Government to utilise existing heads of power to take full responsibility for energy market institutions, utilising the corporations, interstate trade and foreign affairs powers. In a later submission to last year’s economic roundtable I made the case for a facilitated process for the increase in Commonwealth legislative powers as a key determinant of increased productivity ( Economic Roundtable Submission.pdf).

* I refer to the Energy and Climate Change Ministerial Council as the Collective of Energy Ministers to provide a single term to refer to all the iterations of the council.

** As an aside, the report called for the national standardisation of ‘system frequency and pressure (voltage) for transmission and distribution.

 

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Life is what happens while you are busy making other plans JWL