The AEMC has published a draft rule setting out a new approach to pricing when generators are directed to operate to keep the grid stable.

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 ‘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 has published a draft rule 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.

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 threshold for participant compensation following market intervention. Both draft rules accompany the AEMC's final report on its Investigation into intervention mechanisms in the NEM which includes a number of additional recommendations on changes to the intervention and compensation framework.

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