The Australian Energy Market Operator announced that it had "suspended the spot market" for electricity in "all regions" because it no longer provided "a secure and reliable supply".
The electricity used to power Australian homes is generally bought and sold in the densely populated east of the country, a system designed to reduce wholesale costs and diversify supply.
But the market was thrown into crisis by a series of supply and demand shocks.
The regulator then intervenes to set prices and organize distribution.
Australia is one of the top three gas and coal producers in the world, but almost a quarter of the thermal power stations on the East Coast are currently shut down due to breakdowns or maintenance work.
The war in Ukraine has also caused demand for Australian gas exports to soar, absorbing any surplus that might ease the shortage in the domestic market.
Supply problems were exacerbated by a cold spell on the East Coast, prompting electricity providers to ask households to restrict their energy consumption.
Most people on the east coast, including the 10 million people of Sydney and Mebourne, have been warned that power cuts could occur.
The regulator had already intervened on several occasions by asking companies to produce more and to cap prices.
"The best interests of consumers will always come first," assured Energy Minister Chris Bowen shortly before the regulator's announcement.
His Labor government blamed the crisis on the Conservatives in power until May, who defended coal over renewable energy.
Last year, 71% of electricity came from fossil fuels, and 51% from coal alone, according to official figures.
© 2022 AFP