Overview

The WEM has been in operation for six years. In that time, it has achieved a significant reduction in the average wholesale electricity price and has resulted in increased private investment in generation capacity. However, the continuing strong growth in demand in Western Australia followed by the global financial downturn has clearly impacted on the electricity sector and the operation of the WEM. As a result, these circumstances have focused attention on some key aspects of the WEM.

The Market Rules Evolution Plan, endorsed by Market Participants on the Market Advisory Committee (MAC) in 2009, highlighted and prioritised a number of areas for market improvement. The Verve Energy Review - commissioned by Government to assess why Verve Energy was in a loss-making position - critiqued the market similarly. Both identified issues around the lack of competition in aspects of the WEM.

Verve Energy Review 2009 [747kB]

An industry working group - the Rules Development and Implementation Working Group (RDIWG) lead by the IMO - was set up in August 2010 to assess these issues. The issues included the:

• pricing and provision of balancing
• provision of load following ancillary services
• operation of reserve capacity refunds, and
• operation of the STEM.

Following advice from the RDIWG and MAC in April 2011 the IMO Board approved new Balancing and Load Following Ancillary Services (LFAS) market arrangements. These new arrangements will enable greater competition in the provision of balancing and load following ancillary services and “cleaner” market-based pricing for these services.

A market trial for the new Balancing and Load Following Ancillary Services Market commenced on 5 December 2011. The trial marked a significant milestone for the MEP as Market Participants have the opportunity to interface with the IMO systems and learn how the new Markets will work.

If you have any enquiries, feedback, or are experiencing issues regarding the Market Trial, please email Rebecca Denton, MEP Communications Officer at rebecca.denton@imowa.com.au.

In 2010 the MEP had a provisional budget of $7.98 million approved for the period up until 30 June 2012. Some of the MEP work will bring forward or replace investment (worth $1.6 million) planned for the  IT systems supporting the WEM that already had approved financing over 2010-2013. This means the IMO only needs up to the net amount of $6.3 million in extra loan financing to cover the MEP.  Over 50% of these monies are provisionally forecast to be used for IT related spending on upgrading the current systems to extend their life.  The remaining monies are for program management and support and appropriate consultancy assistance given the need to ensure the IMO staff remain focussed on core service delivery functions. All consultants working on the program have had experience working in other wholesale electricity markets.

System Management costs are in additional to these figures. 

The MEP will provide Market Participants with a more efficient and competitive WEM.  Key changes will include:

• more cost reflective balancing pricing and opportunities to provide competition for  balancing services
• a greater ability to use more accurate information in the operation of the Short Term Energy Market (STEM);
• more opportunities for  competition in the provision of  Ancillary Services; and
• a more adaptable IT system supporting the current WEM.

Decisions around all expenditure are subject to the IMO approval processes, including IMO Board approval where required.  The actual amounts will be capitalised and recovered from Market Fees over subsequent years.

The IMO Board met on 16 February 2012 to consider the Final Rule Change Report (RC_2010_10) that provides for the establishment of the new Balancing and Load Following Ancillary Service (LFAS) markets. This body of work represents the most significant evolutionary step in our Wholesale Electricity Market (WEM) since the WEM commenced in 2006.

The IMO Board approved the Final Rule Change Report for RC_2010_10, subject to minor editorial changes, and the report was published, along with the final rule amendments, on 23rd February 2012.

RC_2010_10 includes a small number of changes to the protected provisions in the Market Rules and is therefore subject to Ministerial Approval. The Final Rule Change Report will be provided to Minister Collier's office for his consideration.

As part of the rule change approval process the IMO Board also considered the appropriate date and time that RC_2010_10 would commence. IMO Management met with many Market Participants in the first two weeks of February to gauge their preparedness for the new Balancing and LFAS markets. These discussions were reported to the IMO Board.

In addition, the IMO Board invited System Management to provide an update in person on their preparations for the new Balancing and LFAS markets.

After considering the advice from the IMO, Market Participants and System Management, the IMO Board proposed a commencement date for RC_2010_10 of 1 July 2012.

For full details on the MEP, click here to view the MEP Summary.

MEP Summary [955kB]

Program Manager, Matthew Pember, has been leading the MEP team which comprises IMO staff and specialist consultants including Jim Truesdale of Concept Consulting, Stefan Korn of Igniter and PSC consultants.

A dedicated program office has been leased for the duration of the MEP at 190 St Georges Terrace.

For enquiries, feedback, or issues regarding the Market Trial, please email Rebecca Denton rebecca.denton@imowa.com.au

Various events will be held throughout the Market Evolution Program.

Further details, and presentations provided at the events, can be found at http://www.imowa.com.au/mep_presentations 

1. Market Procedures Workshops

The IMO held a series of workshops throughout November 2011 to discuss the Market Procedures necessary for implementing the new Balancing and Load Following Ancillary Service markets alongside the draft Rules.

2. General Information Sessions

To help explain the MEP, the IMO is holding General Information Sessions for Participants and the wider electricity industry on a quarterly or as required basis.

The first two sessions were held in March and July and a third session will be held early in 2012.

3. Participant Site Visits

The MEP team is also offering individual site visits for key Participants. If you or your organisation would benefit from a site visit to provide information regarding the MEP design, procedures or systems, please contact matthew.pember@imowa.com.au

4. Trading Workshop

The IMO held a Trading Workshop on 21 November 2011 to discuss the logistics of trading in the new 24x7 market. The workshops focused on:

• The establishment of a trading desk (business hours) and the hand over to operational staff – the need for trading policies, escalation management, on-call requirements, training needs, etc;
• Trading strategy and opportunities that may make it easier to manage the logistics of market participations; and
• How to manage market deviations from the forecast.

5. IT Forum

The IMO held an IT Forum on 31 January 2012 to provide an update on how the Stage 2 Market Trials were progressing. 

Further Information

For more information on any of the above or to arrange a site visit, please contact Matt Pember, Program Manager, on 9254 4307 or email matthew.pember@imowa.com.au

The IMO publishes MEPWatch, a regular email update on the Program. To subscribe, please email imo@imowa.com.au  and you will be added to the list. To view previous issues of MEPWatch click here.