News Topic ID

Enhancing the Retailer of Last Resort scheme

20 June 2024

The Australian Energy Market Commission (AEMC) has released its final report with 10 recommendations to improve the Retailer of Last Resort (RoLR) scheme, drawing on valuable insights gained by regulatory agencies, market participants, and governments during the energy crisis of 2022, which saw an unprecedented number of retailer failures.

AEMC Chair Anna Collyer said the recommendations would simplify and improve both the RoLR scheme and the gas directions framework, providing market participants with greater certainty and clarity before, during, and after retailer failure events.

‘’The recommendations focus on supporting more timely access to critical information in the event of retailer failures, reducing the cost of such failures for consumers and designated RoLRs, and improving incentives within the RoLR scheme.

‘’These recommendations were informed and shaped through extensive stakeholder consultation over the past two years.

''We believe they will enhance the RoLR scheme as an effective safety net, helping address the risks faced by retailers and consumers when a retailer fails, ultimately supporting better market outcomes and ongoing financial resilience in the retail market," Ms Collyer said.

In the National Electricity Market’s (NEM) competitive retail market, high levels of entry and a dynamic spot market create the risk of retailer failures. As such, retailer failures are likely to occur over time, necessitating efficient and effective exit arrangements that ensure continuity of supply for impacted consumers while minimising costs and systemic risks.

Most of the AEMC’s recommendations involve changes to the National Energy Retail Law (NERL), meaning they must be implemented by jurisdictions.

‘’The AEMC welcomes the opportunity to work constructively with jurisdictions, to progress these recommendations for implementation,’’ said Ms Collyer.

Background:

The RoLR scheme protects consumers by ensuring continuity of supply to a customer if their retailer fails. This framework is supported by a gas directions framework which allows the AER to direct gas supply in the event of a retailer failure.

Between 2012 and 2022, the RoLR scheme had only been used four times, and the AER had never used its gas directions powers. Following the unprecedented number of retailer failures in mid-2022, Energy Ministers sought the AEMC’s expert advice on managing retailer failures and improving market resilience.

A key recommendation supported by Energy Ministers was for the AEMC to initiate this Review to consider improvements to the RoLR scheme. Our final report and 10 recommendations deliver upon this work.

View the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Consultation starts on rule changes on compensation for AEMO gas direction

22 June 2023

The Australian Energy Market Commission (AEMC) is considering a rule change request relating to compensation for market participants that may be impacted following intervention by AEMO in gas markets.

Federal and State Energy Ministers recently placed additional responsibilities on the Australian Energy Market Operator (AEMO) to monitor threats and risks to gas supply within Australia’s East Coast Gas System (ECGS) and to take actions to address shortages and ensure reliability for consumers.

Through these responsibilities, AEMO may make directions to support the reliability and adequacy of supply.

In the event AEMO intervenes in the ECGS, participants may incur costs and be eligible for compensation.

Compensation measures for the broader ECGS are currently based on the existing compensation frameworks in the Victorian Declared Wholesale Gas Market (DWGM). However, recent experiences in the National Electricity Market (NEM) and DWGM compensation frameworks have highlighted opportunities for refinements of the compensation and dispute resolution frameworks.

The AEMC is now investigating proposed changes from Energy Ministers to improve clarity, efficiency and consistency for entities that may be affected by AEMO interventions.

Examples of potential solutions identified by Energy Ministers, and explored in the consultation paper, include changes to the governance and procedural arrangements, the scope of the frameworks, and the funding arrangements that underpin them.

The consultation paper outlines the issue, proposed solutions and asks a number of key questions for stakeholders.

Submissions close 20 July 2023. A public forum will be held on 6 July to assist those preparing written submissions, please click here to register.

For more information, visit the project page.

Media: Nicole Stokes, 0401 826 522, media@aemc.gov.au.

New rules to manage the risk of reduction in supply for Victorian gas users

15 December 2022

The Australian Energy Market Commission (AEMC) has made a final rule to enable the Australian Energy Market Operator (AEMO) to better respond to and manage the risk of reduction in supply for Victorian gas users that may arise due to the tight demand-supply conditions expected from 2023 to 2025.

The final rule provides an interim solution to the low levels of contracted capacity at the Dandenong liquefied natural gas (LNG) storage facility observed since 2019 by requiring AEMO to act as a buyer and supplier of last resort to ensure AEMO does not crowd out other participants.

The final rule also sets out the contractual, cost recovery, proceeds distribution, accountability and transparency arrangements that will apply to the buyer and supplier of last resort roles over this period.

These measures are intended to reduce the risks to the safety, security and reliability of gas supply in Victoria and support the efficient operation of the declared wholesale gas market (DWGM) over 2023-2025.

Under the rule, AEMO will be able to manage threats to system security in the DWGM more effectively through the use of the Dandenong LNG facility, even if market participants do not contract for LNG capacity themselves.

The rule was made in response to a rule change request submitted by the Victorian Minister for Energy, Environment and Climate Action (Victorian Minister) on 8 August 2022. The rule change request was one of the priority actions that was agreed to by Energy Ministers on 8 June 2022, as they acknowledged the critical role of gas storage facilities.

The final rule will be in operation from 2023 to 2025 while the Energy Ministers' gas market supply adequacy and reliability reform program is undertaken.

Visit project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC recommends rules for hydrogen and renewable gases

24 November 2022

Recommended rules that will help pave the way for Australia’s hydrogen and renewable gas industry and support our emissions reduction plans have been sent to Energy Ministers for approval.

The Australian Energy Market Commission’s (AEMC) recommended rules enable Energy Ministers to change the national gas and retail regulatory frameworks so that low-level hydrogen gas blends and renewable gases can be safely supplied through existing distribution pipelines to appliances in homes and businesses.

Under the Review’s terms of reference, the AEMC was required to consult upon the proposed rules contained in the final report. Having done this, we are now publishing the recommended rules.

AEMC Chair Anna Collyer says these rules represent critical steps towards the development of a national hydrogen and renewable gas industry.

“The changes we are recommending be made to the framework aim to provide clear ‘rules to the game’ for future potential investors, and pilot projects that are taking those key steps today," Ms Collyer said.

"We want to ensure those investors can confidently make informed decisions that will in turn grow the sector, paving the way for a decarbonised economy.

“We can’t know exactly what shape a net zero power system will take, but we can define the problems we need to solve to get there and create space for innovation to find the solutions.”

In line with the terms of reference, once the AEMC provides Energy Ministers with recommended rules for their approval, the legislation and rules would then be made.

Visit project page for more information and contact details.

Media enquiries: Georgina Kentwell 0411 043 964, media@aemc.gov.au

AEMC publishes final rule to incorporate distribution connected facilities in Victorian gas market

08 September 2022

The Australian Energy Market Commission (AEMC) has made a final rule to allow distribution connected facilities to participate in the Victorian declared wholesale gas market (DWGM). These facilities will be able to supply natural gas, low-level hydrogen blended gas, biomethane and other renewable gases.

Currently, the Victorian DWGM only recognises transmission-connected facilities and does not allow market participation from entities connected to distribution pipelines.

This work addresses that by amending the National Gas Rules (NGR) to also recognise facilities connected at the distribution level. The new framework will commence on 1 May 2024.

Chair of the AEMC, Anna Collyer said the final rule will provide the foundation for innovation that will allow the hydrogen industry to develop further.
“These reforms will enable proposed pilot projects to participate in the Victorian gas market, encouraging technological innovation in an evolving market and regulatory environment as it seeks to promote safety, reliability, and security of supply,” Ms Collyer said.

The rule change will ensure the current design of the Victorian gas market is maintained whilst clarifying the roles and responsibilities of all market participants.

The changes primarily apply to distribution connected facilities with minor changes being made to existing facilities where a cohesive approach was required. The changes are categorised across three key areas:

Market operations, including registrations, scheduling and bidding
Market settlements, including title, custody and risk, and allocations
System operations, including connections, metering, and gas quality.

The AEMC notes that there may be technical matters governed by Victorian legislative and regulatory arrangements that still need to be considered by other bodies to safely enable injections into distribution networks which are beyond the scope of this rule change and the AEMC’s rule making power.

The Commission recommends stakeholders collaborate with Energy Safe Victoria, the Victorian Department of Energy, Land, Water and Planning, and any other relevant regulatory bodies to progress any further work required to enable distribution connected facilities to operate in a safe and efficient manner.

This rule change was requested by the Victorian Minister for Energy, Environment and Climate Change, The Hon. Lily D’Ambrosio and works towards facilitating the Victorian Government work program, such as the Renewable Hydrogen Industry Development Plan, Gas Substitution Roadmap, Towards 2050: Gas Infrastructure in a Zero Emissions Economy initiative and Climate Change Strategy to reach net-zero emissions by 2050.

This rule change was progressed in parallel with the AEMC’s Review into extending the regulatory framework to hydrogen and renewable gases. The final report has also been published today.

Visit the project page for more information and contact details.

Media: Jessica Rich - 0459 918 964 - media@aemc.gov.au

AEMC publishes final report for hydrogen and renewable gas review

08 September 2022

The Australian Energy Market Commission (AEMC) has recommended to Energy Ministers that changes be made to the national gas and retail regulatory frameworks to enable the natural gas sector to use hydrogen and renewable gas to support Australia’s emissions reduction plans.

The recommendations in the final report and accompanying proposed draft rules published by the AEMC are critical steps toward the development of a national hydrogen and renewable gas industry.

The AEMC’s recommendations pave the way for setting up national regulatory frameworks so that hydrogen blends and renewable gases can be safely supplied through the existing distribution systems to appliances in homes and businesses.

AEMC Chair Anna Collyer said improvements to the regulatory framework will lay the foundations for the development of a decarbonised gas sector and keep Australia firmly at the forefront of reform in the hydrogen industry.

“From our perspective at the AEMC, hydrogen is fascinating because of the way it uniquely intersects with both gas and electricity markets. It’s a future source of renewable fuel, but it’s also set to become the largest industrial customer for electricity in the NEM’s history.

"We can’t know exactly what shape a net zero power system will take, but we can define the problems we need to solve to get there and create space for innovation to find the solutions.

That’s what this work does. Hydrogen has the potential to deliver solutions we need for a net zero future, and by extending the regulatory frameworks, we allow participants to develop their business and facilitate innovation,” Ms Collyer said.

The AEMC’s work not only offers certainty to market participants and investors but provides clarity around access to pipelines, as well as supports well-informed decision-making by market participants and consumers.

The AEMC’s final recommendations also aim to enable the safe supply of low-level blended gases and consumer protections including billing and pricing.

As well as outlining recommendations for an efficient, safe and secure framework, the final report also sets out recommended draft rule changes for the National Gas Rules and National Energy Retail Rules. These accompanying draft rules are intended to operationalise the policy recommendations.

Written submissions on the recommended draft rules are open until Thursday 13 October 2022.

The final initial rules will be provided to Energy Ministers in November 2022.
Visit project page for more information and contact details.

Media: Jessica Rich - 0459 918 964 - media@aemc.gov.au

AEMC consults on interim LNG storage measures in Victoria’s Declared Wholesale Gas Market

01 September 2022

The Australian Energy Market Commission (AEMC) has started consultation on an urgent rule change to the National Gas Rules received from the Victorian Minister for Energy, Environment and Climate Action to reduce the risks to system security and public safety and improve the reliability of supply in the Victorian declared wholesale gas market (DWGM) between winter 2023 and 2025.

The rule change request was one of the priority actions that was agreed to by Energy Ministers on 8 June 2022, as they acknowledged the critical role of gas storage facilities.

The proposed rule would provide an interim solution to the low levels of contracted capacity at the Dandenong LNG facility observed since 2019 by requiring AEMO to act as a buyer and supplier of last resort to ensure AEMO does not crowd out other participants.

Submissions are invited from stakeholders on the matters identified in the consultation paper, and any other relevant issue by 29 September 2022. Written objections to the use of the expedited process need to be received by 15 September 2022. A final determination is expected to be published by 24 November 2022.

More information about the rule change can be found here.

For media inquiries: media@aemc.gov.au

Contact: Jessica Rich 0459 918 964

Advance notice of intention to initiate the rule change on interim LNG storage measures in Victoria’s Declared Wholesale Gas Market

11 August 2022

The Australian Energy Market Commission (AEMC) will initiate a rule change process in relation to an interim change to LNG storage measures in the Victorian Declared Wholesale Gas Market with the publication of a consultation paper in September.

We expect the request will be initiated under an expedited process. A decision to expedite the process does not indicate an AEMC position on the substance of the rule change.

For media inquiries:media@aemc.gov.au

Contact: Jessica Rich 0459 918 964

New ‘fit-for-purpose’ consultation rules

04 August 2022

New rules improving consultation on subordinate instruments in the National Electricity Rules (NER) and National Gas Rules (NGR) come into effect on 11 August 2022.

The final rules let decision-makers choose from a broader range of consultation processes so they can more flexibly manage the substantial reforms facing energy markets. While the process provides the certainty and transparency that market participants expect from robust consultation.

The electricity rule introduces two fit-for-purpose consultation processes that can be applied depending on which is most appropriate to the case:

one for non-material changes, including new instruments (the expedited process)
one for minor and administrative changes.

The standard two rounds of consultation will be retained for changes likely to significantly affect the NEM or the activities of market participants.

Recognising that consultation can reveal more complexity than originally envisaged, the new rule also allows consulting parties and stakeholders to request a switch from the new expedited process to the standard two-round process.

The changes also simplify and give more certainty about consultation timeframes, allowing decision-makers to extend a standard process when the circumstances change or matters are complex.

The gas rule removes the extended consultative procedure from the NGR. Instead, parties will consult according to the standard and flexible two-round process.

No changes have been made to the retail consultation procedures in the National Energy Retail Rules (NERR).

This initial rule change was requested by the Australian Energy Market Operator (AEMO) and supported by the Australian Energy Regulator (AER). It aimed to make consultation procedures more flexible and fit for purpose.

When the rule comes into effect it will not affect any existing processes underway before the implementation date.

Visit the project page for more information and contact details.

Additional time for DWGM rule change

30 June 2022

The final determination on a proposal to allow gas production and storage facilities to connect to distribution networks in the Victorian Declared Wholesale Gas Market (DWGM) will now be published on 8 September 2022.

The extension of time responds to the complexity of the issues and the importance of this reform for managing the ongoing decarbonisation of the energy sector. The project remains an important priority to the AEMC, providing the foundation for technological innovation in a rapidly evolving market.

The rule change seeks to open up the Victorian Declared Wholesale Gas Market (DWGM) to include distribution connected facilities that can supply natural gas, low-level hydrogen blended gas, biomethane and other renewable gases.

Currently, the Victorian DWGM only recognises transmission-connected facilities and does not allow market participation from entities connected to distribution pipelines.

The AEMC continues to work with AEMO, retailers, and Victorian distribution companies to investigate what changes are required in order to efficiently incorporate blending facilities into the DWGM market framework.

The extension of time will also allow this work to coincide with the final report for our Review into extending the regulatory frameworks to hydrogen and renewable gases.

Although no formal consultation will occur during this extension period, we will continue to undertake informal consultation to progress this rule change, including:

welcoming discussions with any interested stakeholders on any aspect of the rule change
holding stakeholder workshops on specific changes from the draft rule.

Visit the project page for more information and contact details.

Media inquiries: Jessica Rich, media@aemc.gov.au

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