Institute of Public Affairs submission to the Inquiry into Energy Planning and Regulation 1. 2.

Reform will need to re-assess and clarify where the responsibilities of the state end and those of the market begin, and conversely where the market ends, and the role of the state begins. [...] The last item—Reform electricity markets—will require a well-thought-through set of interconnected changes to the National Electricity Law, the National Gas Law, and the National Energy Retail Law; the role and function of the Australian Energy Regulator (AER), the Australian Energy Market Operator (AEMO) (including its development of the Integrated System Plan under the National Electricity Objec. [...] Yielding to the temptation to shift responsibility and blame between Canberra and the state capitals, and between governments and business, is sure to result in the problems becoming worse and the difficulty of reform increasing, while the time available becomes shorter. [...] The design of the NEM is based on two implicit principles: (i) that the value of electricity does not vary with the source, while (ii) the value of energy can vary enormously throughout the day and year, including the lead-time before delivery, and according to location. [...] The set of incentives are encouraging a collective game that may be in the short- and medium-term interests of the players, but deleterious to the long-term interests of electricity consumers and the nation as a whole.