Multiple energy sources characterise gas and electric power distribution systems, especially the latter. An energy market is needed, but the physical characteristics of these systems have an important bearing on this market. For example, electricity cannot be stored and emergency spare generating capacity is needed as a minor failure can precipitate a crisis. These characteristics, along with the manipulation of depreciation provisions in accounts, facilitate opportunistic profiteering and neglect of investment in critical assets leading to system failures. The critical role that energy plays in everyone's lives makes the states reluctant to participate in interstate electric power markets.
Government intervention is inevitable.
The Greens WA believe the critical components of energy systems should not be in foreign ownership for reasons of national security and public accountability. State governments own energy utilities, but the Commonwealth does not. Therefore it is appropriate that the Commonwealth be the energy market regulator to avoid the states' conflict of interest as both the regulator and being among the regulated. The rate of return on energy industry assets can vary widely according to the provision made for depreciation in the accounts, a consequence of the long life of these assets and the assumptions made in valuing them. Rate of return is therefore a poor measure of industry performance.