Rule changes: Open

The Ministerial Council on Energy (MCE) has proposed a Rule change request in respect of inter-regional transmission charging in the form of a Load Export Charge (LEC). Following submissions on the draft Rule determination, the Australian Energy Market Commission (AEMC) decided to delay making the final Rule determination for this Rule change request in order to consider introducing a uniform national inter-regional transmission charging solution.  A key reason was because the AEMC considered there was an inconsistency in the calculation of the LEC that could undermine the efficiency of the approach.

Introducing a uniform national inter-regional transmission charging solution will require further consultation.  This has the potential to improve the cost-reflectivity of transmission charges and the allocation of costs across regions (especially in the event of changes in transmission flows).  Most consumers in the NEM do not currently contribute to the costs of transmission assets in other regions that support electricity flows to their region.

The AEMC is formally extending the period of time for making a final rule determination.  The purpose of the extension is to allow time to undertake modelling of approaches to uniform national inter-regional transmission charging solutions outlined in the discussion paper of 25 August 2011.  The Commission received a number of submissions in response.  The responses were varied. There was no overall preference for one option.  Issues were raised in relation to each of the options that require additional analysis.

To enable additional modelling of options to take place, the AEMC gave notice on 10 November 2011 to extend the period of time for the making of the final Rule determination to 11 October 2012.

All enquiries in relation to this project should be addressed to Mark Allen on (02) 8296 7800.

Background

On 15 February 2010, the AEMC received a Rule change request from the MCE.  The Rule change request proposes to introduce an inter-regional transmission charging mechanism to Chapter 6A of the National Electricity Rules (Rules) in the form of a load export charge.  Under the proposed Rule, the new inter-regional transmission charging arrangements would be given effect by obliging transmission businesses in each region to levy a Load Export Charge on transmission businesses in adjoining regions.  The Load Export Charge would be determined based on the flow of electricity from one region to another.

This Rule change request follows from the AEMC's National Transmission Planner (NTP) Review and Review on Energy Market Frameworks in light of Climate Change Policies (Climate Change Review).  The AEMC recommended, as a part of the recommendations from the NTP Review, that the current lack of a systematic inter-regional transmission charging mechanism could impede the development of a more efficient national transmission network.  In response, the MCE requested that the AEMC consider the need to improve the existing inter-regional transmission pricing arrangements as part of the Climate Change Review, which was completed in 2009.  This Rule change request is based on the recommendations from the Climate Change Review.

On 13 May 2010, the AEMC gave notice under section 95 of the National Electricity Law (NEL) to commence consultation on the Inter-regional Transmission Charging Rule change request. A notice under section 107 of the NEL was also published at this time to extend the publication date of the draft Rule determination to 30 September 2010 due to issues of sufficient complexity. A number of these issues were outlined in the Consultation Paper prepared by the staff of the AEMC, which was published to provide guidance to stakeholders in commenting on the Rule change request. Submissions on the Rule change request closed on 24 June 2010.

On 30 September 2010, the AEMC gave notice under section 107 of the NEL to extend the publication date of the draft Rule determination to 2 December 2010. The Commission considered that this extension of time was necessary due to issues of sufficient complexity and a material change in circumstances. Specifically the extension allowed transmission network service providers sufficient time to complete modelling that the AEMC requested and also provided time for the AEMC to consider the modelling outcomes.

On 2 December 2010, the AEMC gave notice under section 99 of the NEL of the making of the draft Rule determination and draft Rule for the Inter-regional Transmission Charging Rule change.  Submissions were originally to be received by 21 January 2011.  However, to take into account new issues identified and the Christmas/New Year holiday period, the consultation period was extended to 25 February 2011.

The AEMC made the draft Rule determination to introduce an inter-regional transmission charging mechanism in the form of a load export charge.  Consumers in a region do not currently contribute to the costs of transmission assets in other regions that support electricity flows to their region.  The load export charge would improve the cost-reflectivity of transmission charging such that consumers that benefit from inter-regional flows contribute to the costs of the transmission assets to provide those flows.

In submissions to the draft Rule determination, stakeholders raised a number of concerns regarding the volatility in charges, the lack of a uniform or consistent national methodology for calculating the charges and calculated charges arising from the application of the proposed methodology which were inconsistent with benefits derived by customers paying the charges.  Submissions also noted the lack of consistency in transmission charging methodologies across the NEM, and argued that this could influence the effectiveness of inter-regional charging.  These submissions highlighted that there are a number of issues with existing transmission charging methodologies that could impact on the efficiency of any inter-regional transmission charging scheme.

The AEMC recognised that there are a number of issues with existing transmission charging methodologies that could impact on the efficiency of any inter-regional transmission charging scheme. The AEMC agreed with concerns raised by stakeholders that there was a need for consistency in the application of the inter-regional transmission charge on a NEM-wide basis. Therefore, the AEMC is considering introducing a uniform national inter-regional transmission charging solution.

The AEMC will explore whether any inter-regional transmission charging option appears likely to contribute to the NEO. The development of this regime and methodology will have regard to the AEMC's separate longer term Transmission Frameworks Review, but will not be merged with that review. To enable this process to take place, the AEMC gave notice on 7 April 2011 under section 107 of the NEL to extend the period of time for the making of the final Rule determination to 23 February 2012.

On 2 June 2011, a section 108A report was published, stating why the AEMC had not made the final Rule determination within 12 months of the publication of the notice under section 95 of the NEL.  Key reasons were that modelling of estimated inter-regional transmission charging required considerable time and new significant issues raised during consultation on the draft Rule determination required additional consultation.  In addition, further consultation was required for developing a uniform national inter-regional transmission charging regime and methodology, which meant the final Rule determination could not be made within 12 months of the publication of the notice under section 95 of the NEL.

On 25 August 2011, the AEMC published a Discussion Paper to assist in the development of a uniform national inter-regional transmission charging methodology.  The Discussion Paper proposed various options for how such a methodology could be implemented.  This Discussion Paper tested the various options with stakeholders to assist the AEMC in determining the overall objectives for developing a uniform national inter-regional transmission charging regime, consistent with the National Electricity Objective (NEO).  Submissions on the discussion paper closed on 23 September 2011.