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After releasing its longterm roadmap earlier this year, the Australian Energy Market Operator has come under pressure to update its governance or be caught flat-footed for the changes ahead.

The grid is changing. But, if it doesn’t change its ways, the Australian Energy Market Operator (AEMO) will be unable to deliver on investment efficiencies, manage growing customer costs and achieve national energy goals, says a report by Cambridge Economic Policy Associates.

Commissioned by the Australian Energy Council and Energy Networks Australia – industry bodies representing the interests of electricity and natural gas companies – the report found the operator required an overhaul of its governance processes.

AEC chief executive Sarah McNamara
AEC chief executive Sarah McNamara

Furthermore, the AEC's chief executive, Sarah McNamara, said it pointed to the need to establish the best ongoing structure and governance for AEMO.

“Given the central role of the market operator in a rapidly transforming energy sector, it is vital the scope of its work and the framework under which it performs its functions remain fit-for-purpose,” she explained.

“This is not intended as a review of AEMO's current performance, but rather a careful consideration of the best governance processes to support high performance and accountability in a shifting energy landscape.”

One rationale for advocating a change is that the scope and subsequent cost of the market operator’s role has expanded, costing registered participants more in upkeep.

Energy Networks CEO Andrew Dillon
Energy Networks CEO Andrew Dillon

Energy Networks Australia CEO Andrew Dillon said it was timely to revisit the existing governance framework – a sentiment echoed in the Edwards review of the Energy Security Board earlier in 2020, which recommended a revised statement of role for AEMO.

“Ministers agreed to that, but today's report suggests governments should undertake a deeper review to ensure the structure and governance of our national market operator can deliver for customers of a modern energy system,” said Dillon.

Essentially, the report compared the Australian market operator to similar economies, such as the USA, New Zealand and the UK, while taking first-hand evidence from market stakeholders.

Though AEMO has taken responsibility for operations such as demand-side participation trials, virtual power plants, ahead markets and its renewable integration program, the report found its management wanting.

In particular, improvements in transparency and engagement were called for. AEMO’s current governance was perceived as being unaccountable to its members, and generally difficult to contact.

The report even raised questions about management’s expertise, opining that perhaps they weren’t ‘well enough informed, or able to address any issues that might arise.’

Ultimately, the Australian Energy Council and Energy Networks Australia are calling for more oversight of the organisation’s activities, and perhaps more ability for governments to intervene on the operator’s independence.

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