The AEMC today released a consultation paper on a rule change request from AEMO seeking to narrow the circumstances in which generators and other market participants are compensated following AEMO interventions in the market.
The request follows a recommendation made by the Commission in our Investigation into intervention mechanisms in the national electricity market. This recommendation aims to minimise costs to consumers when AEMO intervenes in the market.
Under the proposed rule change, affected participant compensation would no longer be payable for system security-related interventions, such as directing a generator to remain online to help keep the grid stable.
Specifically, affected participants would not be paid compensation for interventions that do not trigger ‘intervention pricing’ under the revised regional reference node (RRN) test. This test determines when AEMO implements intervention pricing and is currently being revised in response to a related AEMO rule change request: Application of the regional reference node test to the reliability and emergency reserve trader.
As the AEMC considers this to be a non-controversial rule change proposal, we are proceeding under an expedited process. Subject to any objections, there will only be one round of consultation. Objections to the expedited process must be lodged by 7 November 2019.
Submissions on the rule change request are due by 21 November 2019. A final rule is due on 19 December 2019.
Media: Prudence Anderson, Communication Director, 0404 821 935 or (02) 8296 7817
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, and more recently Victoria, to maintain adequate system strength. When AEMO intervenes in this way it provides compensation to ‘directed’ and ‘affected' participants and also applies ‘intervention pricing’, which is when the wholesale spot price is adjusted to preserve market price signals that would have occurred but for the intervention.
To keep the cost of directions to a minimum and reduce distortion of investment signals, the AEMC published a draft rule in August 2019 to clarify when intervention pricing should and shouldn’t apply. The draft rule removes the use of intervention pricing for directions related to services not traded in the market such as system strength.
The draft rule accompanied the AEMC's final report on its Investigation into intervention mechanisms in the NEM which recommended several changes to the intervention and compensation frameworks.
The report recommended that AEMO submit a number of rule change requests that would, among other things, further improve the interventions framework by narrowing the circumstances in which affected participants can be compensated following interventions (the subject of the rule change request and consultation paper published today).