The electricity system in Australia begins with the acquisition of primary energy sources. These include sunlight, wind, water, coal, and gas.

In the classic supply-chain model of electricity:

• Generators make electricity from these primary sources which then flows into the transmission network
• The transmission network then transports electricity to the distribution network
• The distribution network then transports electricity to residential and commercial buildings
• End users use the energy.

This model includes:

• Retailers who arrange for delivery of electricity to customers
• Consumers who pay retailers for electricity.

However with the global emergence of new technologies, the modern Australian electricity system is less linear and more dynamic, and in terms of the market, the lines between generators, retailers and customers are less clearly defined.

Electricity market

The flow of electricity through the physical energy system is controlled by the national electricity market. The National Electricity Market (NEM) is comprised of a number of

• competitive wholesale markets including a:
  • spot market
  • contract market
  • ancillary services market
• regulated monopoly networks

Regulation

Both the physical electricity system and the electricity market are regulated by the three energy market bodies, each with specific responsibilities:

• Australian Energy Market Commission (AEMC) - rule making for the energy system and market
• Australian Energy Market Operator (AEMO) - operation of the energy system and markets
• Australian Energy Regulator - monitoring and regulation.

AEMC's role

The AEMC makes and amends the National Electricity Rules that underpin the NEM. These include the rules that:

• govern the operation of the NEM - the competitive wholesale electricity market and the associated national electricity system
• govern the economic regulation of the services provided by monopoly transmission and distribution networks
• facilitate the provision of services to retail customers

We conduct independent reviews and provide advice to governments on the development of electricity markets.

In both of these functions we are required by law to have regard to the National Electricity Objective (NEO) and to ensure the best outcomes for energy customers.