The Australian Energy Market Commission has been asked to rule on a proposed contingency plan if an event occurs to delay the implementation of five-minute settlement.

The Australian Energy Market Operator (AEMO) has submitted a contingency plan for AEMC consideration. AEMO advises that its preparations and industry readiness are on track to meet the planned 1 October start date. But it has submitted a rule change request as a precautionary measure given the late issues that can arise with major IT change projects.

Five-minute settlement is a major market reform that means the electricity spot price will be settled at five-minute rather than 30-minute intervals. It affects many parts of the electricity sector: generators, network businesses and retailers are all getting new systems in place to accommodate the change. 

The Commission is dealing urgently with this request for a contingency plan because going live with five-minute settlement before AEMO or industry can meet essential capability requirements would be a threat to the market.

AEMO will advise the market if there is any cause for delay by 1 September. If no delay is needed, the AEMC will not make a rule and the go live date will stay at 1 October. In the meantime, we will consult with industry on the impact of AEMO’s three proposed alternative start dates and make a final ruling by 30 September that reflects the best interests of the market. 

“It is critical that industry does not halt or slow down preparations for five-minute settlement,” AEMC Chair Anna Collyer said.

“If no contingency event occurs, the start date of 1 October 2021 will still apply, and they will need to be ready. It is also important to make clear that any long-term or indefinite delays are off the table.

That’s because most work to implement this reform has already been done and five-minute settlement is fundamental to securing the fast-response energy options needed as the energy sector decarbonises.”

AEMO have identified two scenarios under a possible contingency plan: 1) an event requiring a short delay until 1 December 2021 2) an event requiring a longer delay until either 1 February or 1 April 2022.

Changing start dates for new reforms under the national electricity rules must be dealt with under the AEMC rule change process because this is the most transparent way to seek input from market businesses managing investment decisions, risks and contracts. 

There is no precedent for the complexity of introducing five-minute settlement because it is the single biggest change to the market since it was created.

AEMO’s Chief Markets Officer, Violette Mouchaileh, said: “AEMO’s 5MS Program is on track to meet the 1 October commencement date. This precautionary rule change proposal is a prudent step for the industry to set alternative commencement dates in the rules should it be needed.”

The Commission notes that any new start date could change the timetable for other, linked reforms and affect existing market contracts for five-minute settlement. We will make a decision on proposed alternative start dates with that in mind.

Submissions to the rule change request and our consultation paper on the issue, released today, will be open until 2 September. A public forum on the issue will be held on 9 August. Please register to attend the public forum here.