The Wholesale Electricity Market (WEM)

In 1993, the Australian Federal Government reformed the electricity industry and created the National Electricity Market (NEM). Due to its geographical distance, Western Australia could not be physically interconnected with the other states.

Instead, the industry was dominated by a single player called Western Power, which was a vertically integrated utility and State Government owned corporation. Due to the lack of competition and high generation costs, Western Australian businesses were paying significantly more than the other states for electricity.

In 2001, the Electricity Reform Task Force was established by the State Government, to review the structure of the Western Australian Electricity Market.

From 2003-2006, the Task Force and Cabinet implemented reforms, one of which was the disaggregation of Western Power on the 1st April 2006 into the four government-owned corporations; Verve (generation), Western Power (transmission and distribution networks), Synergy (retail) and Horizon Power (regional supply).

Subsequently, on the 21st September 2006 the Wholesale Electricity Market (WEM) was established in the South West Interconnected System (SWIS) of Western Australia.

Since 2006, the WEM has facilitated greater competition and encouraged private investment in the generation and the retail sectors of the electricity industry. This is considered a prerequisite for the Western Australian electricity market to become more reliable, sustainable and minimise the cost of electricity to customers in the SWIS.

Within the WEM, there are three mechanisms for energy trading; Bilateral Trade of Energy (Bilateral Contracts), Short Term Energy Market (STEM) and the Balancing Mechanism. In order to implement the WEM in accordance with the Market Rules, the Independent Market Operator (IMO), a government body, was established in 2004 to oversee its administration and operation.

Following a government review, on the 30th November 2015, the Australian Energy Market Operator (AEMO) assumed control of the operationof the WEM

For information on the WEM Rules visit IMOWA Market Rules

The Structure of the Wholesale Electricity Market (WEM)

wem-diagram