The Wholesale Electricity Market (WEM)
The WEM for the South West interconnected system of Western Australia (SWIS) commenced operation on 21 September 2006 following a decision by the government of the day to reform the state's electricity industry. The electricity reform process, initiated in 2001, included disaggregating the state-owned and run Western Power Corporation into four separate entities and implementing the WEM.
The WEM aims to facilitate greater competition and private investment and allow generators and wholesale purchasers of electricity (such as retailers) greater flexibility as to how they sell or procure electricity and with who they transact.
AEMO is responsible for operating the WEM in accordance with the Wholesale Electricity Market Rules (WEM Rules) and the related WEM Market Procedures.
Other entities that play a role in the oversight of the WEM are:
- The Minister for Energy, who established the initial WEM Rules and approves proposed changes to Protected Provision in the Market Rules;
- The Economic Regulation Authority, which performs regulatory and market surveillance roles;
- The Independent Market Operator (IMO), which performs the administration of the WEM Rules and monitors and enforces compliance with the WEM Rules; and
- The Electricity Review Board which acts as an adjudicator for appeals.
The WEM Rules establish the objectives of the WEM which are:
- to promote the economically efficient, safe and reliable production and supply of electricity and electricity related services in the South West interconnected system;
- to encourage competition among generators and retailers in the South West interconnected system, including by facilitating efficient entry of new competitors;
- to avoid discrimination in that market against particular energy options and technologies, including sustainable energy options and technologies such as those that make use of renewable resources or that reduce overall greenhouse gas emissions;
- to minimise the long-term cost of electricity supplied to customers from the South West interconnected system; and
- to encourage the taking of measures to manage the amount of electricity used and when it is used.
The structure and processes that constitute the WEM are established through the WEM Rules. These were developed by the Office of Energy (now known as the Public Utilities Office) with substantial support from a number of expert teams comprising representatives from industry and Government.
The design that has been developed for the WEM comprises a wholesale electricity trading component and a capacity component.
A comprehensive explanation of the WEM design is provided in the WEM Design Summary:
Wholesale Electricity Market Design Summary