The AEMC has published a draft rule to ensure that generators which are directed to keep the grid stable can be fairly compensated.

The transformation of the electricity system is continuing to accelerate, which is presenting opportunities and challenges, including for the management of power system security.

A growing number of directions are being issued by AEMO to synchronous generators in South Australia to maintain adequate system strength. When AEMO intervenes in this way, it provides compensation to generators which are directed to operate and to those generators which are “affected” by the direction, meaning they were dispatched differently as a result of the intervention. 

A directed participant is generally entitled to formula-based compensation and may claim additional compensation if that amount is insufficient to cover its net direct costs and lost revenue. Affected participants are also entitled to automatic compensation to put them in the position they would have been in but for the intervention.

Currently, the Rules include a $5,000 threshold which limits the payment of compensation both to and by affected participants. The threshold also limits the payment of additional compensation to directed participants beyond the amount automatically calculated.

The Commission has made a draft rule to amend the compensation threshold for additional compensation claims made by directed participants so that it applies per direction and not per trading interval. This means directed participants will be able to recover the costs they incur when providing a service under direction.

The Commission considers that it is appropriate for directed participants to recover the costs they incur when providing a service under direction, and that the "per trading interval" threshold should not limit the amount of compensation that can be paid if directed participants are out of pocket.

However, the draft rule does not change the threshold as it applies to affected participants. This is because, in the final report of the Investigation into intervention mechanisms in the NEM published alongside this draft rule, the Commission recommends that eligibility for affected participant compensation be significantly narrowed. Specifically, the Final report recommends that a rule change be submitted so that affected participants are only eligible for compensation in connection with interventions which trigger intervention pricing, in accordance with the revised regional reference node test. 

This would align the treatment of participants affected by system security interventions to the treatment of participants affected by constraints under the normal operation of the system. Where constraints are used to secure the system, no compensation is payable.

If the recommended change is made, participants who are dispatched differently due to a system security intervention would no longer be eligible for affected participant compensation. 

Submissions on the Commission’s draft determination are due by 26 September 2019.

This draft rule has been made alongside a draft determination about the Application of the regional reference node test to the RERT which determines when intervention pricing is to apply. Both draft rules accompany the AEMC's final report on its Investigation into intervention mechanisms in the NEM which includes a number of recommended changes to the intervention and compensation frameworks.

This work is all part of the AEMC’s system security and reliability action plan

Media: Prudence Anderson, Communication Director, 0404 821 935 or (02) 8296 7817