Following NT Power’s withdrawal from the Territory’s electricity market effective in September 2002, and recognising the pricing implications that can arise from monopoly service provision, the Government approved in principle a process of prices oversight of Power and Water Corporation’s generation business by the Commission for as long as that business is not subject to competition or the tangible threat of competition. The purpose of such regulation is to ensure that the wholesale energy prices paid by contestable customers are similar to those that would occur in a competitive environment and that Power and Water Corporation’s generation business recovers, over time, from individual contestable customers, no more than the reasonable long-run cost of supplying them with wholesale energy, including a return on capital invested commensurate with the commercial and regulatory risks involved.

In April 2005, the Commission undertook a review of the generation component of electricity prices paid by contestable customers, with that review covering the financial years 2002-03 and 2003-04.

The Commission found that, during 2002-03 and 2003-04, Power and Water Corporation's wholesale electricity generation prices were generally consistent with the Commission's estimates of the reasonable costs of generation in those years.

The Commission updated this assessment in June 2006. The Commission found, that during 2004-05, there were increases in Power and Water Corporation's average wholesale generation revenues per kWh, which now brings them close to or slightly above the Commission's estimates of the reasonable costs of generation. These increases were mainly due to the cost of fuel and a shift in the asset valuation methodology used for pricing from book values to replacement values.

On 28 October 2010, the Commission released its Final Report on Review of Options for the Development of a Retail Price Monitoring Regime. The final report made recommendations on the merits of monitoring the wholesale generation price. For more information, see Newsroom.

System Imbalance Prices

The Territory electricity market is based on a bilateral contracting system, rather than a power pool, or spot market. Suppliers of electricity to contestable customers are required as a licence condition to take reasonable steps to ensure that they have sufficient generation available to meet the load of their contracted customers.

Under the Network Access Code, the Commission oversights prices paid (or received) by third-party generators when purchasing (or selling) any mismatches between the energy generated by such generators and the load attributable to end-use customers supplied by these generators. To view the Network Access Code, see Electricity Networks (Third Party Access) Act under Legislation.

In May 2002, following revisions to the Network Access Code that took effect on 1 July 2001, the Commission accepted Power and Water Corporation's proposed economic dispatch arrangements pursuant to clause 85 of the Code. These have been incorporated into the System Control Technical Code. To view the System Control Technical Code, see System and Market Operation.