Market Review: Completed

Overview

On 1 November 2013, the Australian Energy Market Commission (AEMC) published its final report on the Review of the national framework for transmission reliability. The AEMC was requested to undertake this review by the Standing Council on Energy and Resources (SCER).
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<p>
On 1 November 2013, the Australian Energy Market Commission (AEMC) published its final report on the Review of the national framework for transmission reliability. The AEMC was requested to undertake this review by the Standing Council on Energy and Resources (SCER).</p>
<p>
The Australian Energy Market Commission has recommended a framework which promotes greater efficiency, transparency, and community consultation in how transmission reliability levels are set and provided across the National Electricity Market (NEM). In particular the framework would:</p>
<ul>
<li>
provide for a more economically efficient way to determine the appropriate level of reliability that transmission networks should provide. This could lead to more efficient investments by transmission businesses and electricity prices that are consistent with the needs of customers.</li>
<li>
provide an independent process for setting reliability standards that separates the body responsible for providing reliability from the body responsible for setting standards.</li>
<li>
set reliability standards ahead of the need to invest to provide transparency and certainty to market participants regarding the level of reliability they can expect to receive and increase the accountability of transmission businesses for the level of reliability provided.</li>
<li>
provide consistency in how reliability standards are expressed, which will allow reliability standards and performance to be compared across the NEM. This will assist the Australian Energy Regulator (AER) to determine revenues for transmission businesses that are consistent with the efficient delivery of their reliability standards.</li>
</ul>
<p>
The key features of the AEMC&rsquo;s recommended framework for transmission reliability include:</p>
<ul>
<li>
an economic assessment process to inform the setting of reliability standards. This will involve assessing the expected costs of investments against expected reliability outcomes. The costs to customers of outages can then be used to guide the setting of reliability standards;</li>
<li>
the expression of transmission reliability standards in terms of network redundancy and requirements relating to when supply would need to be restored following an outage;</li>
<li>
the flexibility for the standard setter to include additional reliability measures to make reliability standards more consistent with customer preferences;</li>
<li>
jurisdictional responsibility for determining the appropriate level of reliability standards with the option to delegate responsibility for applying the framework to the AER or another body which is independent of the transmission business;</li>
<li>
the ability for jurisdictional ministers to specify additional reliability requirements for areas of economic or social importance;</li>
<li>
greater opportunities to consult with customers and consider community preferences;</li>
<li>
obligations under the National Electricity Rules for transmission businesses to comply with their transmission reliability standards each year; and</li>
<li>
national reporting and auditing of transmission reliability performance and planning.</li>
</ul>
<p>
To inform the Commission&rsquo;s development of its final report, the Commission engaged Parsons Brinkerhoff to provide advice on different ways to express transmission reliability standards.</p>
<p>
In particular, Parsons Brinkerhoff were requested to provide advice on how additional reliability measures, including output measures, could be combined with the minimum requirements relating to network redundancy and restoration times in setting reliability standards. A copy of Parsons Brinkerhoff&rsquo;s report is available below.</p>
<p>
<strong>Background</strong></p>
<p>
On 8 February 2013, the AEMC received a request from SCER to undertake a review to develop national frameworks and methodologies for regulating electricity transmission and distribution reliability across the NEM.</p>
<p>
This review had two workstreams:</p>
<ul>
<li>
a review to develop a national framework and methodology for regulating transmission reliability in the NEM (transmission workstream); and</li>
<li>
a review to develop a national framework and methodology for regulating distribution reliability in the NEM (distribution workstream).</li>
</ul>
<p>
These two workstreams were undertaken in parallel and where possible the AEMC sought to ensure that there was consistency between the frameworks which were developed for transmission and distribution networks.</p>
<p>
This review formed part of a package of energy market reforms agreed to by the Council of Australian Governments and SCER in late 2012 to develop nationally consistent frameworks for transmission and distribution reliability and to allow jurisdictions the option of delegating the responsibility for applying these frameworks to the AER. Transmission and distribution reliability is currently regulated differently in each jurisdiction in the NEM.</p>
<p>
This review built on previous work undertaken by the AEMC under the:</p>
<ul>
<li>
<em>Transmission</em> <em>reliability standards review</em>, which was finalised in November 2010 and was responded to by SCER in November 2011;</li>
<li>
the New South Wales workstream of the <em>Review of distribution reliability standards and outcomes</em>, which was finalised in August 2012; and</li>
<li>
the national workstream of the <em>Review of distribution reliability standards and outcomes</em>, which was further progressed through the distribution workstream of this review.</li>
</ul>
<p>
The AEMC published an issues paper for public consultation on the transmission workstream of the review in March 2013. Submissions on the issues paper closed in May 2013.</p>
<p>
In July 2013, the AEMC published a consultation paper which set out the key features of the Commission&rsquo;s proposed frameworks for both distribution and transmission reliability. Submissions on the consultation paper closed in August 2013.</p>
<p>
The AEMC published a final report on the distribution workstream of the review in September 2013, which set out the Commission&rsquo;s recommended framework for distribution reliability. Further details on the distribution workstream of the review can be found <a href="~/Markets-Reviews-Advice/Review-of-the-national-framework-for-distribution" title="here">here</a>.</p>
<p>
<strong>Terms of reference for the transmission workstream</strong></p>
<p>
Under the transmission workstream of the review, the AEMC was requested by SCER to:</p>
<ul>
<li>
develop a national approach to expressing transmission reliability outcomes;</li>
<li>
develop a nationally consistent approach for establishing transmission reliability settings;</li>
<li>
assess the costs and benefits of the above approaches in line with the National Electricity Objective;</li>
<li>
develop a mechanism for measuring and regularly updating the value of customer reliability with the Australian Energy Market Operator and in consultation with jurisdictions;</li>
<li>
consider options to take into account local circumstances which may require different levels of reliability;</li>
<li>
develop a nationally consistent approach to reporting on transmission reliability across the NEM;</li>
<li>
advise on the appropriate changes to the institutional arrangements for setting and applying transmission reliability levels; and</li>
<li>
ensure that any proposed framework and methodology makes explicit the opportunity for jurisdictions to transfer responsibility for applying the framework to the AER.</li>
</ul>
<p>
A copy of SCER&rsquo;s terms of reference can be found below.</p>

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