Sally McMahon, Commissioner

Energy in Western Australia Conference 2026

Ritz Carlton | Perth, Australia

Good morning, and thank you for the opportunity to speak with you today.
I’d like to acknowledge the Traditional Owners of the lands on which we meet here in Perth, the Whadjuk people of the Noongar Nation, and pay my respects to Elders past and present. I am grateful for the cultural influence and lessons from connection to Country that will be central to the transmission, renewable energy and industrial decarbonisation task ahead of us.

Australia's energy sector plays a pivotal role in decarbonising our economy, supporting national prosperity and, in turn, ensuring the long-term well-being of society. Delivered effectively, a smooth and timely transition to a low-emission power system can provide households and businesses with low-cost energy when and where they need it, and help other industries, such as transport, meet their emissions reduction objectives.

Transmission infrastructure is critical to achieve this ambition.

Today I will share a bit about the AEMC and its work program, and discuss how those lessons, together with experience in the national electricity market, may provide guidance on delivering the significant transmission infrastructure necessary to achieve a low-cost, low-emission future energy system. That guidance may be valuable in unlocking opportunities in the Pilbara.

The central lesson is that the delivery of transmission depends on confidence. Confidence for investors that they can recover efficient costs, confidence for users that shared infrastructure will meet the reliability and security standards they require, and confidence for communities that the benefits and impacts are being dealt with honestly.

The Pilbara is both an economic powerhouse and one of Australia's hardest decarbonisation tests. It contributes significantly to national wealth, while accounting for about 40 per cent of Western Australia's emissions. The Pilbara Energy Transition aims to cut these emissions by shifting from a go-it-alone, "I'll look after myself" model to common-use infrastructure.

An important factor will be generating enough confidence to let go of control.

My goal today is to make sure that when we're asked how we get there, we don't have to say, well, I wouldn't start from here.

Role of the AEMC

The AEMC is the independent rule maker for the National Energy Market. It is likely less well known here in the wild, wild west, where I live.

We make rules governing the wholesale market, regulated infrastructure, retail markets and consumer protection. The government sets policy. We make rules to give effect to that policy and to guide the Australian Energy Market Operator in operating the market and system, and the Australian Energy Regulator as the economic regulator and enforcer.

This is a slightly different model from WA, where government is both policy and rule maker, drawing on industry and consumer assurance and advice from the market advisory committee (MAC), Pilbara Advisory Committee (PAC) and Gas Advisory Board (GAB) and public consultation processes.

The AEMC has been busier than ever, responding to the pace of change in the national electricity market over east. One major change has been to formally bring the emission reduction targets into the national electricity objectives. That means the national market bodies now need to take into account the relevant emissions targets set by jurisdictions when making decisions.

A similar greenhouse gas emission objective is now in the State Electricity Objective here in WA. Although, here, it is one objective applied across multiple systems rather than multiple targets applied across one system.

I'll touch on some of our recent key projects and draw out lessons for transmission delivery.

Electricity

We are reviewing the future of electricity network regulation. We will do this in two phases. First, what services should be regulated and why? And second, how?

This review recognises that economics, technology and policy have shifted since the old boundaries were set between services best delivered by competitive markets and those with monopoly characteristics warranting regulation. This review will also consider the impact of a boundary between capex and opex and the strength and focus of incentives in a future energy system.

As part of stage one, we're considering rule changes to clarify the role of distribution networks in providing EV charging infrastructure which will be critical to reducing emissions and the energy wallet. This is a case that has already been acted on here in the West.

Over east, the debate is whether it has natural monopoly characteristics that, if regulated, would better support rapid rollout of the infrastructure to stimulate more EVs and competition in energy charging markets.

A key lesson here is that competition drives efficiency and innovation, but some investment and delivery may require the certainty that only regulation can provide.

Gas

We are also reviewing gas networks to manage the long-term economics if fewer people use them.

Our current draft rule would improve accountability for businesses and the regulator for making decisions today that affect the future. Revealing forecast demand, investment and pricing over a 20 year term will help identify emerging risks and impacts early to increase the options and time to address them.

The gas regulatory framework has always anticipated competition with electricity. Changing policy, economics and technology is making this competition sharper and imminent.

If left unaddressed, this will become an ever-growing problem for government, as already experienced in the West.

And as gas remains critical for industry and GPG, we need to balance the risk/reward package to maintain ongoing incentives to invest in supply and services where and when needed.

Gas and electricity

We can no longer consider the gas and electricity systems as separate. Electrification, consumer energy resources, electric vehicles and storage will reshape the future of gas distribution networks, and place new demands on electricity networks.

So we also now require electricity distribution networks over east to prepare 20 year plans to give greater visibility to the low-voltage system where much of the change is occurring.

This will provide a clearer view for consumers, communities, investors and non-network providers of how network systems and emerging technologies will evolve and how decisions at the distribution level interact with transmission planning and the broader energy system.

A key lesson here is that we need confidence in cost recovery and services to support investment. But we also need to reveal risks early and clarify responsibility for managing them.

The integrated system plan

The national electricity market's Integrated System Plan (or ISP) sets out a 20 year whole-of-system plan for the efficient development of the power system in the long term interests of consumers.

In 2020, the rules were changed to provide for actionable ISP projects, which strengthened the link between the plan and delivery of regulated transmission. I consider the ISP one of the greatest reforms in the NEM since the national rules were developed. Perhaps that is because I've been around long enough to remember what it was like to consider the need for a project with no guidance on which ones might work together or be supported by the regulatory process.

A key challenge is that the national plan now must accommodate multiple jurisdictional policies and targets. Those choices are legitimately made by governments, but they do not operate in isolation - decisions in one part of an interconnected system can affect investment and consumers elsewhere. That makes coordination and transparency even more important.

We're reviewing how to make the ISP more valuable, including extending actionability into the distribution network, encompassing gas infrastructure, and clarifying interactions with jurisdictional planning.

A key lesson here is that long term planning plays a valuable coordination and information-sharing role that supports investment in regulated and unregulated assets. It is even more important in times of uncertainty. It forces us to engage with what needs to be done and the best way to do it, and reveals our assumptions so we can adjust quickly and confidently when things change.

The national framework for transmission

The NEM was created to move electricity from a state-based utility model to a more efficient, competitive, interconnected national market. Its original promise was lower-cost, more reliable supply through competition and coordination.

Its current challenge is adapting that framework to a system increasingly dominated by millions of small renewable generation options, storage, flexible demand and a transmission-led transition.

With my AEMC hat on, I'm drawn to a national interconnected framework and want to see it work better for jurisdictions, reducing the temptation to go it alone.

With my National Competition Council hat on, I see the productivity gains from Australia's interconnectedness.

And with my WA hats on, I can see this state has unique systems requiring a different approach.

For a long time we thought we had the transmission model about right. That is transmission regulated under an incentive-based open access regime, giving investors and consumers certainty on access, service standards, pricing and cost recovery, regardless of whether assets are publicly or privately owned. But the scale of investment needed to deliver low-emission generation, and the need to meet multiple jurisdictional targets, has tested that system.

Some states have concluded that the national rules can't deliver the transmission they need in time, leading to a proliferation of jurisdictional schemes with clear government-nominated projects, streamlined planning and approvals, and requirements for developers to deliver local community benefit.

NSW REZs

Most notably, NSW developed the Electricity Infrastructure Roadmap to establish renewable energy zones and a parallel delivery regime under the Electricity Infrastructure Investment Act. It replaces open access, where the network provider augments the network to meet demand, with physical limits on access where capacity is insufficient.

It also makes ownership and operation of regulated transmission contestable, on the view that this increases capacity to deliver the projects needed and attracts private capital.

Private capital brings commercial discipline, but the regime must be clear about who carries construction, utilisation and revenue risk. These issues can significantly shift the risk/reward balance the national regulatory framework strikes. That is, a low regulated return with careful, largely fixed allocation of risk.

The WA model

WA is different. Beyond Horizon Power's multiple systems, there's the wholesale market in the South West, supported by the South West Interconnected System (SWIS), and the North West Interconnected System (NWIS) in the Pilbara. This diversity, alongside NEM experience and jurisdictional carve-outs, has a lot to teach us.

In the SWIS, the state government plans and owns the regulated shared network, coordinating transmission delivery, large-scale renewables, battery storage and flexible gas generation, and working with communities to deliver a lower-cost, low-emission system.

The SWIS Transmission Plan and the Clean Energy Link Program, delivered by Western Power, will connect renewable generation, support coal retirement, and electrify industry.

State ownership has facilitated planning, coordination, capital and management of local issues. It is delivered under a mature, regulated open access regime that provides confidence through clarity and accountability.

The common thread across the national, jurisdictional and SWIS models is open access with clear terms relating to price, security, reliability, and clear cost recovery for investors. These are applied from the outset to infrastructure that has since evolved toward mixed public and private ownership and contestable delivery.

The Pilbara model

The Pilbara is different again. It has predominantly private infrastructure, go-it-alone, with no central plan and no certainty of cost recovery or returns.

It hasn't needed an access regime with enforceable service standards, because miners have built what they need to solve their own reliability and security requirements at lowest cost.

There is a shared system. The current NWIS comprises networks owned by Horizon Power, APA and Rio Tinto, which was covered by an open access regime in 2021 as set out in the Pilbara Network Access Code (PNAC) following several access disputes.

The NWIS is operated by an independent system operator under the Pilbara Network Rules (PNR). Both the PNAC and PNR are evolving as greater interconnection and renewable generation place new demands on system operation, technical standards and governance.

I visited the Pilbara for a round table in Karratha and toured the surrounding area. What struck me was the criss-crossing of infrastructure across the landscape. How can so much duplication be efficient?

But those assets weren't built for lowest-cost shared use. They were built to deliver the reliability and security needed to get product to market predictably, and to underpin strong commercial contracts with clear accountability. Under these arrangements, confidence is achieved through control.

Decarbonising the Pilbara

The Pilbara Energy Transition is ambitious and necessary. Its challenge isn't just cutting emissions. It is replacing a go-it-alone model built on control, with common-use infrastructure to connect and unlock the region's strong wind and solar resources.

The economic case is strong. A CEFC-commissioned Marsden Jacob report found coordinated common-use transmission and generation could save more than $30 billion over 25 years compared with a fragmented approach. It would also mean less duplication across Country, better access for smaller users and future industries, and a more productive Pilbara economy.

Industry supports decarbonisation and accepts that common-use infrastructure can lower costs, but there's still no settled answer on how benefits, risks, access rights will be allocated and service standards set. Until that's clear, capital may not show up, load may not commit, and assets may not be built.

The PET identifies four priority transmission projects to be delivered by private capital, supported by access to WA's allocation of up to $3 billion in concessional financing under Rewiring the Nation. It adopts familiar features present in jurisdictional schemes. That is, government nominated projects, coordinated planning, Traditional Owner and community benefit obligations, contestable delivery, and targeted government support.

The proposed access regime gives investors and users a starting point. The PNAC binds revenue and pricing and provides recourse to arbitration, with corridor agreements helping bridge the transition as it evolves. But it does not yet provide the certainty of a mature, regulated framework.

In the NEM and SWIS, revenue certainty also comes from efficient cost recovery, a diversified customer base and decades of regulatory precedent. In the Pilbara, load is concentrated among a small number of industrial users exposed to commodity cycles, making commitment risk more acute and harder to diversify.

Arguably, even with concessional financing, investors will want the arrangements to be bankable. That is, understand the risk of load showing up and recovering costs (and returns) before committing capital. Miners need to know what they gain and risk regarding security, reliability and cost.

Both will ask the same question: who carries the risk when the system is under stress?

It is potentially a classic chicken-and-egg problem.

The framework we're asking the Pilbara to embrace needs to be strong enough to substitute for control.

Clear, enforceable access rights, service standards, recourse and accountability can narrow that gap, but is there a chance that the flexibility may impede, rather than advance, commitment? Will uncertainty get priced in as risk or delay?

Or, as the NSW REZ framework is learning, does flexibility to strike bespoke arrangements also open the door to renegotiation once the balance of power shifts?

Conclusion

The models over east and in the SWIS show that shared transmission infrastructure can work when it creates confidence.

The Pilbara starts from a different place.

The Pilbara already knows how to create confidence through control. The challenge is whether common-use arrangements can create enough confidence without it.

Get that right, and transmission will do more than connect renewable energy to load. It will connect the Pilbara's industrial strength to cleaner growth, regional opportunity, and the long-term interests of the communities and Traditional Owners whose Country, work and future prosperity are part of this transition.

And when we're asked how we get there, we should be able to answer with optimism: well, we can start from here.

Thank you.