The Commission has decided not to make a rule following its consideration of whether to change the nature of the obligation on generators and other participants to comply with dispatch instructions from the Australian Energy Market Operator (AEMO) when supplying electricity into the market.
The National Energy Market relies on participants making bids and offers to consume or produce electricity at various prices every five minutes throughout the day. Each generator’s offers are combined into a merit order then dispatched by AEMO. The National Electricity Rules impose a strict obligation on market participants to comply with AEMO’s dispatch instructions. This central dispatch process allows electricity supply and demand to be balanced throughout the day.
The rule change request proposed replacing the strict obligation to comply with dispatch instructions with an obligation based on “reasonable endeavours”.
The Commission found that with a “reasonable endeavours” approach, generators are likely to be less diligent in complying with dispatch instructions. Over time, this could require AEMO to procure more frequency control services to manage frequency fluctuations on the power system and maintain system security, which could increase total system costs and ultimately wholesale electricity prices paid by customers.
The Commission also found there is an appropriate level of regulatory certainty around the current strict obligation to comply with dispatch instructions. Although the Australian Energy Regulator has a level of discretion in how it exercises its enforcement powers, it clearly outlines how it exercises this discretion taking into account the realities of the electricity market.