The Market Evolution Program (MEP) is the large body of work focussing on the next steps for the Western Australian Wholesale Electricity Market (WEM).

The WEM has been in operation for six years. In that time, it has achieved a significant reduction in the average wholesale electricity price and has resulted in increased private investment in generation capacity. However, the continuing strong growth in demand in Western Australia followed by the global financial downturn has clearly impacted on the electricity sector and the operation of the WEM. As a result, these circumstances have focused attention on some key aspects of the WEM.

The Market Rules Evolution Plan, endorsed by Market Participants on the Market Advisory Committee (MAC) in 2009, highlighted and prioritised a number of areas for market improvement. The Verve Energy Review - commissioned by Government to assess why Verve Energy was in a loss-making position - critiqued the market similarly. Both identified issues around the lack of competition in aspects of the WEM.

An industry working group - the Rules Development and Implementation Working Group (RDIWG) lead by the IMO - was set up in August 2010 to assess these issues. The issues included the:

pricing and provision of balancing
provision of load following ancillary services
operation of reserve capacity refunds, and
operation of the STEM.
Following advice from the RDIWG and MAC in April 2011 the IMO Board approved new Balancing and Load Following Ancillary Services (LFAS) market arrangements. These new arrangements will enable greater competition in the provision of balancing and load following ancillary services and “cleaner” market-based pricing for these services.

Rule drafting and system development is now underway, with the aim of the new rules coming into operation in April 2012. More information on these arrangements can be found out www.imowa.com.au/RDIWG.

Work on reserve capacity refunds is ongoing. Work on STEM issues was put on hold in light of the lack of perceived efficiency gains identified.

A market trial for the new Balancing and Load Following Ancillary Services Market commenced on 5 December 2011. The trial marked a significant milestone for the MEP as Market Participants have the opportunity to interface with the IMO systems and learn how the new Markets will work.