As the great Trinidadian polymath C. L. R. James observed: “Eminence engenders enemies.” And so it is that the Australian Energy Market Operator (AEMO), the only institutional body with the common sense foresight to set out a plan for Australia’s energy transition, is being targeted by incumbent energy industry puppets of the fossil fuel industry, ironically, for apparent “governance issues”.
The Australian Energy Council (AEC) and Energy Networks Australia (ENA), both of which are about as heavily invested in fossil fuels as the Natural History Museum is in fossils themselves, have put their dirty energy behind a UK firm called Cambridge Economic Policy Associates Pty Ltd) (CEPA), engaging the company for a report on the governance arrangements for the market and system operator roles in the National Electricity Market (NEM).
However, it should be said that Cambridge Economic Policy Associates is probably more closely related to Cambridge Analytica than Cambridge University. This is to say that any moral compass likely to malfunction when that deep in the grasp of a dirty mine. And as CEPA itself admits, its material isn’t “verified or audited.”
Now, it is perfectly reasonable to say, as CEPA does, that AEMO’s role has increased in size since 2009, and that perhaps then its governance is in need of reform. What is unreasonable, however, is the 48 pages of drivel which follow, a tepid attempt to slow AEMO’s and Australia’s progress toward a renewable energy future. After all, AEMO’s 2020 ISP, a roadmap to the world’s fastest energy transition, is described by the Clean Energy Council (CEC) as the best and most cost-effective option for a modern NEM.
The irony of this report is perhaps most blatant in that the AEC’s and ENA’s main motivation for the report is a concern about money spent by AEMO on transition research, modelling, planning, and pace of change. An ironic concern if only because the AEC and ENA paid for CEPA to investigate the “governance structures and parameters within which AEMO operates, rather than reflecting on AEMO’s performance of its critical role in the energy market.” This task, CEPA itself admits, is not a “comprehensive package of recommendations”, but a point of discussion, which means that AEC and ENA have spent money on research of even less practical value than anything of which they could charge AEMO.
The irony doesn’t stop there, with CEPA defining ‘a governance framework’ as the “systems and processes through which authority in an organisation is exercised and the organisation is held to account.” Surely then the investigation should be into the Federal Government’s expensive distaste for ISP 2020 than AEMO’s well-received roadmap.
Moreover, CEPA admits that its already limited terms of reference (the sheer clutching at straws of “governance arrangement”), and the limited access CEPA had to AEMO anyway, meant that its “review has necessarily focused on external arrangements.” This is to say CEPA’s review is into the responsiveness of AEMO to exterior influence from “members, regulators, or other stakeholders”. This in itself is not lacking in value, but does smack of the kind of majoritarianism which, if generally employed, would make The Bachelor our next Prime Minister. Although, on second thought, that might resemble an improvement.
AEC Chief Executive, Sarah McNamara, said that AEMO’s central role in the rapidly transforming energy sector makes it vital to ensure that the “Scope of its work and the framework under which it performs its functions remain fit-for-purpose.”
While ENA CEO Andrew Dillon said that the CEPA 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.” Quite a glaring thing to say when considered, that a Government featuring more back-stabbings than the Roman Senate should undertake a review of another institution’s governance.
The report identifies three ways to improve AEMO’s governance structure toward more transparency and engagement. These points are not so much recommendations, or even insights, as mere statements in the wind.
The first argues that there is “limited evidence of…members holding the operator to account through the formal governance channels.” Although it doesn’t seem to occur to CEPA that the logical explanation of this might be that AEMO’s members are satisfied with AEMO’s governance.
After all, there is no evidence AEMO doesn’t consult its members, only last week the Energy Security Board (ESB), the Australian Energy Market Commission (AEMC), the Australian Energy Regulator (AER), and AEMO, published a collaborative work, Post 2025 Market Design Consultation Paper, in which each section offers potential food for thought and further enquiry in the form of questions posed to stakeholders. For example, under Transmission Access, the paper asks:
- The second ISP has now been released. Do you have any comments on how its implementation can be made more efficient and timely?
- The development of REZs is important for the transition underway in the NEM. Do you have any suggestions on how large-scale priority REZs can be more efficiently developed and connect into the network?
- NERA Economic Consulting’s modelling of the benefits of introducing transmission access reform in the NEM has been published. What do you think about the modelling and assumptions used?
Secondly, CEPA suggests that Council of Australian Governments (COAG) oversight may not be ideal, and yet this is the very kind of government oversight the report suggested AEMO is lacking earlier.
Thirdly, the report says that “formal arrangements to support accountability are weaker than those seen in other jurisdictions.” An “option” of such wittering ambiguity that Orwell could’ve used as a particularly vacuous example of Newspeak.
As the above graph shows, the only real options CEPA provides is that either a Budget and Planning Committee or the Australian Energy Regulator (AER) could intervene in the governance framework between AEMO members and the board. This latter option is not so ridiculous, indeed, as a suggestion it is only ridiculous in that it is already happening. Late last month, AER published its guidelines to make the ISP actionable, “to provide certainty, transparency and accountability for AEMO, transmission businesses, and stakeholders to promote efficient investment in electricity services for the long term interests of consumers.”
Ultimately, AEC, ENA, and CEPA, miss the point entirely, yes it may be time to look at AEMO’s governance structure due to its increasingly central role in Australia’s energy future, but that review should be into how AEMO’s governance can be better supported, not better restrained.
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