AEMO is a product of the 90s. Its governance needs to reflect the world we’re in now

The Australian Energy Market Operator (AEMO) is a child of the 1990s.

It was set up as a company limited by guarantee, designed to give incumbent generators and retailers confidence that the market operator would be technically competent, independent and not subject to political interference on a Tuesday afternoon in mid-summer. That structure had a logic at the time.

It did not envisage a world where rooftop solar can supply more than half of instantaneous NEM demand or that home batteries would soon total gigawatts (GW).

The task is no longer managing a largely static, centralised system – it is supporting fast, efficient decarbonisation with distributed (including consumer) energy resources doing much of the heavy lifting.

The governance review of AEMO led by Nigel Ray is therefore timely. The risk is that it produces incremental tweaks to an architecture that needs a fundamental rethink.

The question I posed in my submission to the review is this: what changes to AEMO’s governance are needed to support at least 82% renewables by 2030, widespread electrification and an orderly exit from reticulated gas, while maximising the uptake and integration of DER/CER and protecting consumers?

The case for making AEMO a Commonwealth body

My clear preference is that AEMO become a corporate Commonwealth entity under the Public Governance, Performance and Accountability Act. That would bring freedom of information (FOI) obligations, proper parliamentary scrutiny and public‑sector performance frameworks — while still allowing robust protections for technical independence in real‑time system operation.

The current Corporations Act structure entrenches weak accountability, limits transparency and has no obvious mechanism for the kind of mission orientation that rapid decarbonisation requires. AEMO is not subject to Senate Estimates.

It is not subject to FOI. Its planning assumptions and modelling are not routinely open to public scrutiny. For an organisation that shapes the energy bills, investment decisions and participation opportunities of millions of Australians, more transparency and accountability is appropriate.

A National Electricity Law (via South Australia) statutory model – essentially the Australian Energy Markets Commission (AEMC) model – doesn’t fix these problems either. The AEMC has its own governance challenges.

The ISP problem – and a possible NSW solution

The review also raises whether some functions should be separated from AEMO. I think planning should be.

The Integrated System Plan has become a quasi‑policy instrument, yet it sits inside an operationally focused company under a governance framework not designed for policy trade‑offs, transparent demand‑side analysis or deep consumer engagement. The Commonwealth Energy Minister had to lodge a rule change request just to get demand‑side resources and CER given appropriate weight in the ISP.

There is an instructive alternative already operating in NSW. AusEnergy Services Ltd, as the NSW Consumer Trustee, effectively runs a mini‑ISP through the Infrastructure Investment Objectives.

In some respects it is better than the national ISP: it looks at bill impacts, not just system costs; it plans generation and storage and it considers demand‑side options in its modelling and investment pathway, and it has genuine accountability to consumers.

That model – with clear statutory objectives around bill impacts, emissions, DER/CER integration and responsibility for planning the full resource mix, including only the necessary transmission – is worth seriously exploring at a national scale.

A board and membership that reflects who owns energy infrastructure now

AEMO’s membership and board structures give formal roles to governments and incumbent industry. Consumers and DER owners – who between them now own a significant share of NEM generation and storage – have had no formal role (at least until the very recent appointment of Luke Menzel, the CEO of the Energy Efficiency Council to the AEMO board). The board has historically skewed towards large‑scale, supply‑side perspectives.

This is not an abstract governance complaint. These arrangements contributed to the Energy Security Board’s proposal to subsidise existing coal and gas through a capacity market, to the rooftop solar cutoff (‘emergency backstop’) mechanisms bypassing normal rulemaking, and to a sluggish approach to demand response, especially enabling an effective wholesale demand response mechanism.

The board and membership structures should be redesigned so that DER/CER, consumer protection, social equity and climate economics are genuinely represented, not peripheral.

What the review must not do

The governance review must not conclude that tidying up the existing Corporations Act structure – better conflict rules here, an extra committee there – is sufficient.

The evidence from the past decade is that incremental adjustments within a fundamentally misaligned institutional structures produce incremental results, when what is needed is a step change in mission, accountability and transparency.

AEMO cannot be fixed in isolation, either. The broader energy governance architecture – including the AEMC’s blurred policy and rule‑making role and the AER’s never‑independently‑assessed performance as an economic regulator – needs to be addressed. A Productivity Commission (or equivalent) review of all the energy market institutions remains overdue.

The AEMO governance review is a rare starting point for big questions about Australia’s energy market institutions. I look forward to reading what Mr Ray writes.

Dr Gabrielle Kuiper is an independent DER specialist whose work portfolio is available at www.gabriellekuiper.xyz