The Australian Energy Market Commission has made a draft rule to change the arrangements for compensating electricity generators, pumped hydro units and large-scale batteries affected when the Australian Energy Market Operator (AEMO) intervenes to maintain the reliability and security of the national electricity market. 

The draft rule helps support a reliable and secure electricity system through the ongoing viability of participants providing frequency services to the market, which are increasingly important as the generation fleet transitions. The draft rule also improves the consistency, transparency and predictability of compensation processes.

When AEMO intervenes in the market by activating the reliability and emergency reserve trader (RERT) or issuing a direction, it is required to pay compensation. AEMO pays this compensation to those participants directed to provide services and to those participants dispatched differently as a result of the intervention.

The Commission’s draft rule relates to the second kind of compensation – referred to in broad terms as “affected participant compensation”. It follows two rule change requests submitted by AEMO. 

The draft rule concerns the compensation payable to scheduled generators and scheduled loads (pumped hydro and large-scale batteries) if they are dispatched differently due to an intervention event which triggers intervention pricing. Intervention pricing is triggered when an intervention is in response to a shortage of energy or frequency control ancillary services (FCAS). Importantly, such compensation is not payable in connection with other interventions to maintain security such as system strength directions. 

Currently, scheduled generators and scheduled loads are eligible for compensation in relation to energy but not FCAS. FCAS are used by AEMO to stabilise the frequency of the NEM when there is an imbalance between supply and demand. The Commission’s draft rule incorporates FCAS into the automatic process of calculating compensation. 

Under this approach, scheduled generators and scheduled loads will both receive compensation where they are worse off with respect to FCAS revenue and be required to repay revenue gains where they are better off with respect to FCAS revenue. The objective is to put the participant in the position it would have been in had the intervention event not occurred.

The draft rule also modifies the way that compensation in relation to energy is calculated for scheduled loads which are dispatched differently as a result of an intervention event. The changes are designed to address the current potential for scheduled loads to be under or over-compensated when an intervention impacts how much they pay for energy.

The consideration of these two rule change requests is part of a wider Commission work program updating the framework for interventions in the NEM.

Submissions from stakeholders are requested by 5 November 2020.

Media: Kellie Bisset, Media and Content Manager, 0438 490 041