The AEMC has extended the timeframe for finalising a rule that determines when AEMO should implement ‘intervention pricing’ following an intervention in the market, for example when AEMO directs generators to keep the grid stable or activates the reliability and emergency reserve trader (RERT). The extension will enable the Commission to align the final determination with two related AEMO rule change requests, allowing all three rules to be published on 19 December 2019.

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’ participants and ‘affected' participants (those who are dispatched differently as a result of an intervention). Currently, when AEMO issues system strength directions in South Australia and Victoria, it 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 market distortion, the AEMC published a draft rule on 15 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.

Today’s extension means the following three rules related to the intervention and compensation framework can all be published on 19 December 2019, ensuring an integrated and streamlined approach:

  1. Application of the regional reference node test to the reliability and emergency reserve trader - dealing with when intervention pricing should apply
  2. Threshold for participant compensation following market intervention - dealing with whether the $5,000 compensation threshold should apply per trading interval or per intervention event
  3. Application of compensation in relation to AEMO interventions - dealing with when affected participant compensation should be payable.

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