The global experience with regulatory reforms that promote competition in small and isolated energy markets is limited. We contribute to this knowledge and policy gap by analysing the reform experience and policy options in Australia's Northern Territory (NT) electricity market. More private participation in electricity generation and retail in the short‐term and intra‐regional market integration in the medium term may be appropriate policy options as the demand for electricity grows. Reforms in smaller electricity markets such as the NT should be geared towards meeting the environmental and de‐carbonisation objectives from the early stages.