A voluntary statement of ethics by
participants in the national electricity
market
Revised version
April 2000
National Electricity Code Administrator Limited
ACN 073 942 775
Foreword
Some people think that the concept of a ‘free’ market is exclusively characterised by
an absence of restraint on those who would pursue their self-interest through trade in
goods and services. Under such circumstances the ‘invisible hand’ is left to do its
work – ultimately ensuring an increase in the prosperity of all. However, this view is
radically incomplete – failing to reflect he most basic understanding of its primary
architect, Adam Smith.
Few now recall that Adam Smith was Professor of Moral Philosophy at the University
of Glasgow. As such, he was critically aware of the fact that a free market can only
operate if it is founded on a sound, ethical base. Smith understood that a free market
cannot exist in a world in which participants lie, cheat or use their power oppressively
– something Smith thought to be likely as merchants strove to achieve an effective
monopoly (which he abhorred). Since the time of Adam Smith, most economists
have sought to re-define the ethical foundations of free markets in terms of ‘market
distortions’. However, Smith’s basic contentions have never been repudiated. Thus,
we should understand a perfect market as one in which:
 every person has both the capacity and the opportunity to make an informed
choice;
 people do not take advantage of those who are relatively powerless;
 people do not purchase things that they neither need nor value;
 people engage in neither misleading nor deceptive conduct; and
 the right goods and services go to the right people at the right price.
Thee emphasis on the word ‘free’ is deliberate because some people wrongly believe
that the idea of a free market is the same as the principle of laissez faire. The latter
concept is something altogether different, in which individual actors are free to do as
they please – effectively unbounded except by those who meet them with equal or
greater force. As such, there are no rules beyond those that the strong agree amongst
themselves, and impose on others. As suggested above, this can be distinguished
from the idea of the ‘free market’ which is regulated by an internal set of ethical
principles that are designed to ensure that the market performs its proper function;
namely, to increase the stock of common good.
It is against this background that participants in the National Electricity Market have
agreed to take a preliminary step in defining a minimal ethical framework for their
market. This initiative is important for a number of reasons. However, of particular
importance is the fact that participants are prepared to hold themselves accountable to
a range of ethical principles that they hold to have an importance that is independent
of any contingent legal framework. For example, the participants’ code echoes
provisions of the Commonwealth’s Trade Practices Act. In some quarters it would be
enough to say that participants should obey the law. However, members of the
industry have committed themselves to uphold a range of core values and principles –
essential for maintaining the integrity of their market. They do so for reasons that go
beyond mere compliance with laws that could have required, in principle, much less
of them. Instead, the industry wishes to commit itself to ethical behaviour as a matter
of course.
Voluntary statement of ethics by participants in the national electricity market
Revised draft
Introduction
The purpose of this statement of ethics is to outline the core ethical principles that will
underpin behaviour by participants in the national electricity market. It is intended to
support and foster a market that is:
 efficient;
 transparent; and
 non-discriminatory.
Commitment
This statement of ethics is intended to apply to all participants in the national
electricity market: generators; customers (including retailers); transmission,
distribution and market network service providers; registered traders; special
participants; intending participants; and NEMMCO and NECA. A list of those
participants that have committed to this statement is attached.
This statement is intended to be co-extensive with the National Electricity Code. It is
voluntary and is not intended to be legally binding, except to the extent necessary to
give effect to the statement itself, or to create legally enforceable standards between
participants or between participants and other parties. Nor is it intended to be
prescribed as a voluntary industry code within the meaning of section 51AD of the
Trade Practices Act 1974.
This statement recognises that it is central to the intrinsic design of the market that
both supply and demand-side participants are able to make and revise bids and offers
in response to changing supply and demand, and other market, conditions including
legitimately to optimise their commercial interests.
Statement of ethics
Participants in this statement of ethics are responsible for upholding the integrity and
reputation of the market. In doing so, they should have regard to the spirit, and not
just the letter, of all applicable laws, regulations, rules and codes. They should also
endeavour actively to manage their risks in order to avoid bringing the market into
disrepute.
Disclosures to the market required under all applicable laws, regulations, rules and
codes should be true, verifiable and specific in accordance with the spirit and not just
the letter of those obligations. Information should not be provided which is intended,
or is likely, to mislead the market.
Participants should make market bids and offers that reflect their intentions at the time
those offers are made. They should provide revised bids and offers, following any
change in their intentions, in a timely way. Any revised bid or offer should be made
in a way that is not misleading or deceptive within the terms of all applicable laws,
regulations, rules and codes; or that precludes a reasonable opportunity for an
appropriate informed market response.
Participants should not seek intentionally to injure the reputation of other participants
through the frivolous or vexatious use of regulatory intervention or processes.
Participants should publicly acknowledge their adherence to this statement of ethics,
and take all reasonable steps to ensure that their employees are informed of and
comply with its provisions.
Rôle of NEMMCO
Accurate and timely information is essential to the achievement of the objectives of
this statement of ethics. This in turn relies, in addition to the adherence by all Code
participants to the principles set out in this statement of ethics, on the unique and
central rôle performed by NEMMCO as independent market and system operator.
NEMMCO recognises the obligations this rôle imposes upon it and undertakes to:
 take into consideration the interests of those who are, or are likely to become,
participants in the market;
 provide equal access to the market for existing and prospective participants in
the market;
 ensure market transparency in the interests of achieving market efficiency;
 ensure effective consultation in respect of its obligations; and
 ensure the national market systems and processes support the efficient, timely
and accurate delivery of market services.
The ethics panel
Any participant may make a complaint to the ethics panel in relation to the failure of
another participant to behave in accordance with the statement of ethics.
The ethics panel will operate according to the principles of natural justice and will be
responsible for determining and publishing its procedures in accordance with those
principles.
The ethics panel will be made up of the following persons:
 a chairman appointed by NECA who is independent of NECA and the parties
to the complaint;
 four individuals each of whom is independent of the chairman, and represents
a different category of participant in this statement of ethics, appointed by the
chairman with the agreement of the participant about whom the complaint has
been made after having disclosed any actual or potential conflicts of interest.
All decisions of the ethics panel will be by majority and, in the event of a deadlock,
the chairman will have a casting vote.
The ethics panel will have the power to:
 dismiss a complaint; or
 if the complaint is upheld:

issue a reprimand; or

issue a reprimand and publish that reprimand on NECA’s website.
Appeal from findings of the ethics panel
Any participant whose behaviour is referred to and reviewed by the ethics panel may
appeal from any determination of the ethics panel to a single expert of appropriate
expertise and standing appointed for that purpose by NECA.
An appeal from a determination of the ethics panel must be made to NECA within 21
days after notice of the ethics panel determination has been given to the participant
the subject of the determination.
On receiving notice of the appeal NECA will, in consultation with the affected
participant, appoint a single expert to determine the appeal.
The expert will be responsible for determining and publishing the procedures for the
appeal and may make such orders as s/he considers appropriate including:
 an order affirming the decision of the ethics panel; or
 an order setting aside the determination of the ethics panel.
National Electricity Code Administrator
April 2000