Who are NEMMCO?
Historically, State and territory governments owned and operated Australia’s electricity suppliers and gas companies and sold electricity and gas at government regulated prices. Australia’s National Energy Market (NEM) was established in the late 1990’s during a period of significant reform to Australia’s electricity and gas supply industry. The goal of this reform was to increase competition between businesses in the electricity supply chain, thereby providing electricity and gas consumers with the power of choice. Consumers could now compare the electricity prices and gas rates available from different suppliers with the theory being that competition would deliver cost efficiencies to the market. NEM is essentially the wholesale market mechanism through which electricity is now traded between registered generators and market customers’ 24-hours-a-day and seven-days-a-week. The NEM market customers are the companies that supply you with electricity.
The National Electricity Market Management Company Limited (NEMMCO) is the body administering and operating the NEM made up of directors from the state governments of Queensland, New South Wales, the Australian Capital Territory, Victoria, South Australia and Tasmania.
How the National Electricity Market is operated by NEMMCO
NEM’s role is to facilitate trade between the producers of electricity and the wholesale consumers of electricity. These activities encompass the entire national electricity grid and include establishing electricity demand levels, receiving offers to supply electricity from generators (the power stations), scheduling generators, dispatching generators into production, calculating the spot price of electricity, measuring electricity use and financially settling the electricity market.
NEMMCO aggregates electricity produced by generators into an electricity pool, and market
Customers (the retail suppliers of electricity who the individual consumer deals with directly) purchase their electricity needs from the aggregated supply. Market forces determine the level of electricity traded and the cost characteristics of that trade. NEMMCO, in turn, pays the generators the spot price for the electricity they supply to the pool.
The NEM covers all of Australia, but in WA, Tasmania and NT the supply of electricity to homes is still regulated fully by those state governments. In NSW, South Australia, Victoria and Queensland, licensed electricity suppliers in each state buy electricity on the NEM market and are responsible for providing this electricity to you at the electricity rate agreed in your contract. In NSW, Victoria, South Australia and Queensland the state governments set the maximum regulated rate that your electricity supplier can charge you. The electricity companies in these states then compete for your business by offering discounts off the regulated electricity rates or other product features.
NEMMCO also ensures that the supply of electricity is secure by measuring of the power system’s capacity to continue operating even if a major power system element, such as a generator or interconnector, was disabled or disconnected. They also manage a Supply Reserve to cater for any short fall in supply of electricity compared to the demand by consumers, ensuring that in our homes and businesses we get continuous supply and the lights will always come on!