NEM Operation

Prior to the 1990s, the Australian electricity sector was characterised by State Government owned, vertically integrated electricity authorities.

In the early 1990s a number of south-eastern States began disaggregating those authorities into separate generation, transmission, distribution and retailing businesses (although in some cases distribution and retailing have remained in the same business). Most assets in the Victorian and South Australian electricity supply chain were privatised between the mid – 1990s and 2000. In contrast, the majority of generation, transmission and distribution assets in New South Wales and Tasmania are currently government owned.

This restructuring has been accompanied by a range of regulatory and market reforms, including the creation of a national electricity market (NEM). Regulatory arrangements relating to the electricity industry are continuing to undergo reform.

The NEM, which commenced in December 1998, is the wholesale market for the supply of electricity to retailers and end-users in Queensland, New South Wales, the Australian Capital Territory, Victoria, Tasmania and South Australia. The NEM was created to improve competitiveness of the electricity sector, provide choice for electricity consumers and help to match the supply and demand requirements among participants across the eastern States.

NEMMCO was established in 1996 to implement, administer and manage the NEM. Later NEMMCO was renamed the Australian Energy Market Operator (AEMO). AEMO’s primary functions are to operate and administer the wholesale national electricity market and to manage the security of the power system in accordance with the National Electricity Rules that are made under the National Electricity Law.

The NEM is divided into five regions: New South Wales (including ACT), Victoria, South Australia, Queensland and Tasmania. NEM regions and State boundaries are closely aligned. Regional boundaries are generally located at points on the transmission network where there are likely to be significant limitations on the electricity transfer capability, or “transmission constraints”. To facilitate the flow of electricity between the different NEM regions they are interconnected by more than one physical transmission line, with the exception of Tasmania which has a single interconnector, Basslink.

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