What does the appointment of Daniel Westerman at AEMO tell us?

So the Board of the Australian Energy Market Operator (AEMO) has gone overseas to recruit its replacement for former CEO Audrey Zibelman. The new CEO will be Daniel Westerman, an Australian-born senior executive for UK based energy utility National Grid.

So what does his appointment tell us about the future direction of AEMO?

Setting aside all the press release bonhomie and good wishes, perhaps the most important factors are how and in what way Westerman is similar or different to Zibelman. Because these differences may indicate how and where AEMO will change tack and where it will continue on its current operational trajectory.

Westerman is an overseas appointment like Zibelman, but it’s different this time. Zibelman was recruited following the sudden death of inaugural AEMO CEO Matt Zema in 2016. The AEMO Board search went overseas only after unsuccessfully trying to recruit from the senior ranks of Australian energy companies.

By the end of 2016 they had turned their gaze further afield to New York, where, it is rumoured, Zibelman was hoping for a Clinton Presidential win in 2016 and a senior energy appointment in her administration. In 2013 Zibelman had been appointed by New York Governor Mario Cuomo as as the Chair of the New York Public Service Commission – the monopoly utilities regulator for water, electricity, telephony and gas in New York State. Before this she was regional Vice President and COO of PJM that coordinated electricity transmission across 13 US states and operated their (capacity) electricity market.

Zibelman was a political agent, regulator and system operator, who prior to AEMO sat at the centre of electricity systems and organised them. She was a radical departure from Zema who was a quietly spoken and reserved technocrat, but deeply respected by his staff and stakeholders.

As AEMO CEO Zibelman worked governments hard: pushing for more central planning and greater power to AEMO to direct proceedings. Upon arrival she pushed heavily for the introduction of a day-ahead market, the same design used by PJM. Her lobbying for more government intervention was the concrete pad upon which NSW Energy Minister Matt Kean built his NEM-breaking decision in late November 2020 to return to central planning.

Zibelman was polarising. She was passionate about climate change and a demonstrable force for change who, to her credit, kept the lights on after the South Australian system black in 2016. She descended into a permanent feud with former AEMC Chair John Pierce, was supported by some governments and crossed others. There was a worrying exodus of senior staff in her short reign at AEMO and she attracted the growing ire of a broadening cohort of major energy market companies, frustrated with AEMO’s rapidly increasing operating costs and the politicisation of technical reports.

Westerman is different. He’s from Melbourne, a mechanical engineering graduate of Melbourne Uni who cut his teeth at Ford and then McKinsey’s in Australia before heading off to the US and then National Grid in 2014. His CV suggests a highly intelligent, commercially focussed executive. He is no energy wonk or political animal.

At 42 he’s young for the role. Westerman’s jobs at publicly listed National Grid included strategy, networks and renewables. Notably he has deep roots in a corporate and commercial culture. AEMO’s spending was out of control under Zibelman. A report by The Australian Energy Networks and The Australian Energy Council in 2020 (representing the businesses that largely fund AEMO) was scathing on the organisation’s skyrocketing costs under Zibelman. Westerman’s appointment suggests the AEMO Board under Drew Clarke is keen to see a more prudential eye on costs.

Westerman leaves no visible political trail, which suggests the AEMO Board is also keen to move away from the highly politicised approach taken by Zibelman. AEMO sits at the centre of the National Electricity Market. Its job is to keep the lights on, at the lowest possible cost, not becoming another player in the already difficult politics on climate and energy policy in Australia.