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Final report for 2022 Reliability Standard and Settings Review

01 September 2022

The Reliability Panel (The Panel) has published its final report on the review of the key reliability standard and market settings (2022 RSS review) aimed at maintaining a reliable power supply.

As the energy sector undergoes unprecedented change in the transition to net zero, it is vital that financial incentives are sufficient to support the investment necessary to provide reliability outcomes consistent with consumer willingness to pay. Getting the right standard and settings in advance of further thermal generation retirements is essential for efficiently promoting the interests of consumers.

The 2022 RSS review considered whether the existing form of the standard and settings are adequate given the transformation occurring in the electricity market. The standard and settings aim to encourage investment in generation or demand response capacity while protecting the market from risk.  

The final report sets out the Panel’s final recommendations for the reliability standard and settings needed between the period of 1 July 2025 to 30 June 2028. They need to be submitted as rule changes to the Australian Energy Market Commission for any changes to be made to the existing standard and settings.

In determining whether the reliability standard and settings needed to be updated, the Panel considered its requirements, along with stakeholder submissions feedback. It also had regard to and balanced a range of trade-offs to determine the need for change for the review period, as well as what may be needed outside the review period as the market transitions. The Panel particularly had regard to consumer concerns about increasing market settings and electricity costs and its final recommendations, specifically the MPC and APC to achieve a trade-off between cost increases and limiting consumer bill impacts while supporting outcomes consistent with the reliability standard.

Final recommendations:

Reliability standard

No change to the current form or the level of the reliability standard for the period of 1 July 2028 to 30 June 2028. The current level of the standard is 0.002% expected unserved energy (USE) in a region over a financial year.
The Panel considers that due to the energy transition and the growth of variable renewables, there is a need to change the way the reliability standard is applied and to capture more information about future reliability risks. The Panel considers changing the form is a better way than tightening the level of the standard.
On that basis, the Panel will undertake a further review of the form of the reliability standard to take account of the increased ‘tail risk’ that is likely to emerge from 1 July 2028. The Panel considers that a change to the form of the standard should be known by the time the next RSS period starts, which is 1 July 2028.
The reliability standard is based on expected unserved energy in a national electricity market region and set at a level that balances delivering reliable electricity supplies and maintaining reasonable costs for customers.

Reliability settings

Market Price Cap (MPC) and Cumulative Price Threshold (CPT)

The Panel’s final recommendation is for a progressive adjustment in the level of the MPC and CPT to achieve an MPC of $21,500/MWh and a CPT of $2,193,000 (corresponding to 8.5 hours of market prices at the recommended MPC).
The Panel has recommended three progressive annual changes over the review period to achieve the recommended level by the end of the review period.
Together, these price settings are considered sufficient to support investment outcomes, consistent with the reliability standard, while also limiting potential systemic financial risks.
The form of the MPC and CPT are recommended not to change for the review period.

Administered Price Cap (APC)

The Panel’s final recommendation is to adjust the level of the APC from $300/MWh to $500/MWh.
The Panel considers consumers’ long-term interests are better served if the APC is raised. This will minimise the likelihood of repeated undue reliance on the compensation process resulting in significant compensation costs being passed through to consumers via their retailers who may be unprepared for these costs as they cannot hedge against compensation.
The Panel recommends that changing the form of the APC from a fixed to dynamic value should be considered in the follow-up review alongside the form of the reliability standard.

Market Floor Price (MFP)

The Panel’s recommendation is to retain the existing level and form of the MFP at -$1,000/MWh. Analysis demonstrated that adjusting the level is not warranted in the absence of clearly identifiable benefits, and there are unacceptable risks associated with a lower level.

The Panel notes the recent Energy Ministers meeting on the path forward for considering any further work related to a capacity mechanism. The merits and design of a capacity mechanism were out of scope for this review as was consideration of the interim reliability measure which the AEMC is required to review by 1 July 2023.

Visit the 2022 reliability standard and settings review for more information and contact details.

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.

New rule aims to protect customers experiencing family violence

16 June 2022

New protections and assistance for energy customers affected by family violence are proposed in a draft determination released for comment by the Australian Energy Market Commission today.

The Chair of the AEMC, Anna Collyer, said energy services can be exploited by family violence perpetrators to control survivors, undermine financial security, and inflict psychological and physical harm.

‘Intimate partner violence contributes to more death, disability and illness in adult women than any other preventable risk factor,’ she said.

‘Perpetrators can use the need for utilities like gas and electricity in many ways to control and harm people – including finding them in new locations.

‘This work is occurring under the National Energy Retail Rules because energy retailers can play a significant role in helping protect the survivors among their customers.

‘The draft includes measures that protect customers’ physical safety by safeguarding their identities and locations, as well as helping with the financial challenges that frequently arise after leaving a violent household.

‘It proposes actions for retailers that will drive changes to their culture, like building their staff’s skills and making the safety of an affected customer paramount in their dealings.

‘Practical changes for retailers include developing processes that reduce a customer’s need to re-live their trauma by having to repeatedly describe their circumstances.’

Ms Collyer said the AEMC had consulted extensively with the energy sector, family violence organisations, and other sectors that had instituted similar protective policies such as telecommunications and banking.

‘We’ve aimed to cover the greatest possible number of customers with this draft rule, by adopting a broad definition of family relationships to identify family violence and by including business customers as well as residential customers’ she said.

‘Similarly, the AEMC also recommends that the rule’s protections should apply to ‘embedded networks’ such as caravan parks, where there might be a single electricity meter with multiple individual users paying a share of the bill.’

The draft rule requires that when dealing with customers affected by family violence, retailers must:

have regard firstly to the safety of an affected customer in any dealing they have with them
not require documentary evidence in order to offer protection
ensure staff can identify, assist, and engage appropriately and effectively with customers affected by family violence
adopt and publish a family violence policy
consider family violence as a potential cause of payment difficulties and hardship
before taking action to recover arrears or sell debt to a third party, take into account the impact of debt recovery action on an affected customer and whether other people are also liable for the energy usage that led to the arrears
not disclose confidential information about an affected customer to another person (and must require their contractors and agents not to disclose this information) without the customer’s consent
take reasonable steps to identify and use a safe method of communicating with customers and then give this preferred method precedence over all other communication requirements in the retail rules
provide a secure process to minimise the need for customers affected by family violence to repeatedly disclose their experiences.

The draft rule also recommends nine of the new provisions be made Tier 1 Civil Penalty Provisions, making it possible for jurisdictions to impose penalties on retailers who breach those sections.

The initial rule change was requested by Red Energy and Lumo Energy. It follows successful family violence reforms in Victoria, draft reforms in Western Australia, and family violence protections in other essential service sectors including water, banking and telecommunications.

Visit the project page for more information and contact details.

Plan to fully realise benefits from DER technical standards

17 March 2022

Customers have led the way in our transition to net zero through investment in their own assets.

Whether it’s to manage their electricity costs, make a contribution to tackling climate change, or both, Australia has the fastest uptake of solar panel investment in the world and that is set to continue.

Today, the Australian Energy Market Commission (AEMC) released its forward plan for its next phase of work on technical standards for distributed energy resources (DER) as part of its final rule determination on the governance of DER technical standards.

To ensure the regulatory framework continues to keep pace with the development of DER technical standards now and into the future, the Commission is committed to reviewing the need for new DER technical standards in the national electricity market (NEM), as well as assessing current requirements are already in place.

AEMC Chair, Anna Collyer, said a key aspect of this review will be considering the ability of DER devices to deliver benefits to consumers as well as the NEM.

“With the continued growth of DER, including rooftop solar systems and small-scale batteries installations, the grid is increasingly supporting two-way power flows back and forth from consumers,” Ms Collyer said.

“We believe the future energy system is one where customers’ energy resources will feature highly.

“We want to ensure the system works for all customers, and customers will have choices about how they get the most value out of their investments. In all our work in this area it’s critical we start with the customer perspective, so the performance of their assets and the system will meet their needs.”

This means the NEM requires technical standards for DER, which are critical to maintaining its security and reliability and minimising negative impacts for the benefit of all electricity consumers. For example, some technical standards ensure rooftop solar systems and batteries which can withstand sharp changes in voltage and don't automatically switch off.

The final rule determination is to make no rule on the basis that no new rules were required to enable the AEMC to act as sought by stakeholders.

Ms Collyer said today's final rule determination allows for a review process that leverages our powers to be flexible in order to respond to the changing needs of customers as they evolve.

This review is complementary to the ESB’s current work on interoperability standards and fits within the broader DER Implementation Roadmap.

This determination was made in response to a rule change request made by Energy Security Board Chair Dr Kerry Schott AO in her former capacity as Chair of the Energy Security Board.

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

Forum: protecting customers affected by family violence

03 February 2022

Tuesday 15 February between 10.00 am and 12.15 pm (AEDT)

Stakeholders are invited to attend a forum considering the rule change proposal, Protecting Customers Affected by Family Violence

Confirmed speakers include:

Carolyn Bond AO, Economic Abuse Reference Group
Catherine Fitzpatrick, Westpac’s Director of Customer Vulnerability and Financial Resilience
Representatives from Red and Lumo
Representatives from Aurora
AEMC staff

The forum will cover:

details about the rule change
the experience of developing a family violence policy (Aurora)
insights from other industries, and
the positive impact of changes on victims/survivors

Please register your interest in attending by emailing projectrrc0042@aemc.gov.au

New plan to make room on grid for more home solar and batteries

25 March 2021

The Australian Energy Market Commission today released a draft determination on how to integrate more small-scale solar – and other new energy technology like batteries – into the electricity grid.

“We can decarbonise the electricity sector faster and cheaper if we connect more small solar customers and make it worthwhile for them to install batteries. But to do that we need to make some changes to the power system,” AEMC Chief Executive Benn Barr said.

“Within 10 years, half of all energy users will be using home energy options like solar. We must make sure this seismic shift doesn’t leave anyone behind because every Australian, whether they have solar or not, deserves an affordable, sustainable power system.”

Today’s draft determination addresses the problem of ‘traffic jams’ on the network, which are occurring now and will get worse as more solar connects because the grid infrastructure was built when power only flowed one way. Blocking power exports because the grid is under strain will cost us all more, because it means less renewable, cheaper energy gets into the system.

Our reform package to make room for more solar includes:

Changing distribution networks’ existing incentives to provide services that help people send power back into the grid. Gives networks a stronger reason to deliver quality export services that customers value. At the moment, there are no financial penalties for poor network export service and no rewards for good service. We also propose recognising energy export as a service to the power system in the energy rules to give consumers more influence over what export services networks deliver and how efficiently they deliver them
Letting networks offer two-way pricing to better manage the poles and wires. Gives networks pricing options they don’t have now, like rewarding solar and battery owners for sending power to the grid when its needed and charging for sending power when it’s too busy. New incentives will give customers more reason to buy batteries or consume the power they generate at busy times on the grid
Flexible pricing solutions at the network level. Allows each network to design a menu of price options to suit their capability, customer preferences and government policies. Customers could choose things like free export up to a limit or paid premium services that guarantee export during busy times. Networks might offer grandfathering for existing solar owners or choose community batteries.

Extra safeguards proposed for the energy rules will ensure existing and new solar customers – and non-solar customers – are protected. The proposal does not mandate default charges for exporting power. If a network business wanted to introduce export charging, they would need to consult extensively with customers and have a transition plan detailing how this would be done approved by the Australian Energy Regulator.

“This is about creating tailored options, not blanket solutions,” Mr Barr said. “We want to open the solar gateway so more Australians can join the 2.6 million small solar owners who have already led the way. But it’s important to do this fairly. We want to avoid a first-come, best dressed system because that limits the capacity for more solar into the grid.

“One option to deal with more solar traffic – building more poles and wires – is very expensive and ends up on all our energy bills whether we have solar or not. While the sun may be free, the poles and wires aren’t, so we think the key is to use the power system smarter to avoid costly overinvestment and keep new infrastructure to a minimum.

“Letting networks give customer incentives to use the system better means supply and demand on the grid can be smoothed out over the course of the day. It helps address large amounts of solar being exported in the middle of the day when it benefits the system least.”
The Commission has already taken on board a wide range of views. We are now asking for feedback on our draft determination, with submissions due by 13 May 2021.

“We know there is a lot of interest in this issue,” Mr Barr said. “We’ve heard and understood the concern among some solar owners about whether they will be able to realise the value of their investment if the system changes.

“We want to reassure solar customers that we’re not proposing they should all start paying export charges. We expect networks to deliver pricing proposals in close consultation with consumers, which may include options where they don’t have to pay for exports.

The Commission modelled the potential impact on customer bills if networks did introduce export charges. We found that 80% of customers would see their bills drop because they would no longer pay for solar export services they weren’t using.

For the 20% of customers with solar, there could be a range of export charge impacts, depending on system size. A 4−6kW system would still earn on average $900 – about $70 less than now. But this impact could look very different if they took up options that rewarded them for using the system differently – such as self-consuming power.

Doing nothing is not an option because blocking people’s power exports will cost them now and more in future. While export charges on a 4−6kW system might lead to a marginal drop in solar earnings, owners will face that same drop if they are constrained from exporting energy just 10% of the time. Being constrained 50% of the time would reduce their solar earnings by more than $300 per year.

“We need to think differently about the power system – including its pricing structures,” Mr Barr said. “We found that buying a battery would allow customers to benefit more and also help the system.
“We have to start planning for a different future now because there is still a lot of work to do and change will take time. If we start now, with the right caveats and protections in place, we will avoid costly crisis solutions further down the track.”

Where these rule change proposals came from

This package of reforms follows a nine-month process of working with stakeholders as part of ARENA’s Distributed Energy Integration Program. The program was led by a steering group of consumer representatives, industry association and energy market bodies. As a result of that work, South Australian Power Networks, the St Vincent de Paul Society, the Total Environment Centre and the Australian Council of Social Services requested the AEMC change the rules. This draft determination is our response to those requests.

Media: Kellie Bisset, Media and Content Manager M: 0438 490041

Final rule for simpler energy bills

18 March 2021

The Australian Energy Market Commission has made a rule change to simplify electricity and gas bills, protecting consumers while also unlocking innovation and competition.

Today’s final determination follows a request from the Minister for Energy and Emissions Reduction Angus Taylor to change the National Energy Retail Rules so that households and small businesses could better understand their energy bills, avoiding confusion and frustration.

“Technological innovation in the energy market is changing how consumers and retailers interact,” the Commission says in the rule determination.

“On digital platforms, such as smart phone applications and web portals, customers can see their energy usage in detail and close to real time. Retailers can communicate with households and small business customers when a direct debit is due, or a price spike is expected, and vice versa. The introduction of a consumer data right in energy is likely to introduce third parties as digital retail service providers, to help consumers find the best deal.”

The rule takes account of new technology options – protecting consumers, while also allowing them to benefit from innovation and market developments.

Under the rule change, existing billing provisions will be replaced with a mandatory guideline to be developed by the Australian Energy Regulator (AER). Energy retailers will be required to comply with this billing guideline, which will govern how they prepare and issue bills to small customers.

The rule sets out the purpose of an energy bill – for example to enable small customers to easily understand payment amounts, dates and methods.

In making the billing guideline, the AER will need to take into account certain principles. These include the need for consumer protections at the same time as enabling innovation and consumer choice, compliance costs for retailers and thus consumers, and the potential benefits of standardised language and terminology across bills, contracts and offers.

The proposed new approach provides a flexible way to respond to changes in the market and consumer choices.

The final rule addresses concerns raised during an extensive stakeholder consultation process.

The rule now explicitly requires the AER, when it is developing the billing guideline, to consider the National Energy Retail Objective (NERO) and the consumer protection test. These are aimed at promoting the long term of interests of consumers and ensuring protections for hardship customers.

The Commission has also amended the draft rule to better enable digital delivery of bill information by allowing the AER to specify in the guideline that retailers can provide different types of information using different delivery methods. “Providing a customer gives their consent, the Commission supports digital delivery of bill content as it fosters innovation and aligns with many customers’ preferences,” the determination says.

Given the rise in the use of apps, the web and email to give consumers billing information, we looked at the availability of paper bills in the market. We found that most retailers offer paper bills on their cheapest offers (75 per cent in Queensland and South Australia, and in NSW on at least one of the three cheapest offers). We consider that if changes are needed for vulnerable customers, a holistic review of customer vulnerability is a better way to deal with concerns about disadvantage in a digitalised environment. The AER will be undertaking detailed customer research on this and other customer billing issues.

In response to feedback, the implementation time frame for the final rule has been amended from the draft. Specifically, while retailers will still be required to comply with the guideline from 4 August 2022, the AER has discretion to set later dates for certain provisions, so long as all provisions in the first guideline start by 31 March 2023.

Media: Media and Content Manager, Kellie Bisset 0438 490 041

New rule helps life support customers switch and save on energy plans

25 February 2021

Customers needing life support equipment – such as kidney dialysis machines – will find it easier and cheaper to shop around for better energy deals under a new rule announced by the Australian Energy Market Commission.

The change to the National Energy Retail Rules released today allows life support customers to re-use certain medical documents that are needed when switching energy suppliers. This means they don’t have to visit a doctor to provide confirmation of their life support status every time they change energy retailers or distributors.

The change fully takes effect from 1 August. It follows a request to change the rules by the Energy and Water Ombudsman of New South Wales, who said customers needing life support equipment faced extra costs and mobility issues associated with additional doctor visits in order to change energy providers.

Now, these customers will be able to re-use their existing medical confirmation when changing retailer or distributor, provided it is less than four years old and is legible.

The rule change also gives customers’ outgoing retailer or distributor timeframes for returning the medical confirmation to the customer and requires them to hold onto the medical confirmation for a period of time after they have switched retailers or moved.

Customers who use life support equipment have special existing protections under the energy rules that place obligations on energy retailers and distribution network businesses to have safeguards around switching off electricity or gas to their home.

The Commission has already moved to strengthen these protections with changes that took effect in early 2019. These included making sure consumers were protected as soon as they informed their retailer or distributor of their life support status.

This latest rule change adds to this work. As part of this new change, the Commission has also updated the definition of “medical confirmation” to make it clear that a medical certificate can be used as medical confirmation of life support requirements.

The final rule is expected to reduce costs for life support customers and give them more flexibility to access retail energy markets.

The AEMC is a long-standing advocate for allowing consumers to shop around for the best deal they can get in the retail energy market.

Media: Kellie Bisset, Media and Content Manager, 0438 490 041

Extension on draft decision for new rules to better integrate distributed energy resources

12 November 2020

The Australian Energy Market Commission (AEMC) has today announced it will extend the time that it will take to publish a draft determination on proposals to better integrate distributed energy resources into the electricity system.

The rule change requests were proposed by SA Power Networks, St Vincent de Paul Society Victoria and the Australian Council of Social Services jointly with the Total Environment Centre.

There has been strong interest in the proposals and the extension will allow us to continue working with stakeholders on how the regulatory framework can be updated to support the integration of distributed energy resources in a way that benefits all customers.

The draft determination will now be published 25 March 2021.

We have also consolidated the three rule change requests so they will be considered together as they deal with similar issues.

Distributed energy resources (DER) include rooftop solar, batteries, electric vehicles and energy management systems. These resources are often located on the consumer’s side of the meter, rather than as a centralised generation source, and are growing in Australia as consumers become more active in the power system.

“Finding solutions to enable the grid of the future is a priority for us,” AEMC chief executive Benn Barr said.

“We want to see a gateway to an expansion of solar and other distributed technologies that also ensures that everyone reaps the benefits of innovation.

“Australian consumers are clearly enthusiastic adopters of distributed energy resources such as solar. As distributed resources continue to grow, the time has come to integrate them properly and in a way that ensures all users benefit from their uptake and that the appropriate consumer safeguards are in place.”

“It is very important to get this right and planning ahead will avoid technical problems, keep costs down and speed up the decarbonisation of the energy sector.”

Background

The rule change requests were received in early July 2020.

They were a result of detailed work undertaken over nine months by a broad collaboration of stakeholders seeking to address consumer-driven power system change through the Distributed Energy Integration Program.

The rule change requests are aimed at better facilitating the efficient integration of DER for the grid of the future.

The proposed changes include:

Pricing and incentive arrangements for distributed energy resources.
Allowing distribution network service providers to charge for exports to the network.
Planning and access to the grid for DER.

The AEMC published a consultation paper on 30 July 2020 seeking stakeholder feedback.

We also held a public webinar on 13 August 2020. We received numerous submissions in response to the consultation paper and held four technical working group meetings to discuss the issues raised in the proposals with a broad range of industry experts.

A link to a consumer FAQ document is here.

Media: Kellie Bisset, Media and Content Manager M: 0438 490041 T: (02) 8296 7813

Draft determination to reduce barriers for life support customers

05 November 2020

The AEMC has released a draft rule to make it easier for customers needing life support equipment to shop around for better deals by allowing them to reuse certain medical documents needed when switching energy suppliers. Submissions are called on the draft rule that reduces barriers to switching energy retailers by consumers who need life support equipment such as kidney dialysis machines.

The Energy and Water Ombudsman of New South Wales (EWON) submitted a rule change request aiming to reduce the costs and mobility issues from the additional visits to doctors that life support customers may face in switching suppliers.

The more preferable draft rule released today enables life support customers to receive back and re-utilise their medical confirmation form (MCF) or other medical confirmation documents submitted for medical confirmation when changing retailer or distribution network service provider, provided it is dated less than 4 years ago and is legible. This will mean that the life support customer may not have to visit a doctor to provide confirmation of life support status to their new retailer or distributor.

To assist with this, the more preferable draft rule provides timeframes under which the customer’s outgoing retailer or distributor needs to return the medical confirmation to the customer and requires the outgoing retailer or distributor to hold onto the customer’s life support documentation for a period of time after they have switched retailers or moved.

The more preferable draft rule also updates the definition of “medical confirmation” to make it clear that a medical certificate can be used as medical confirmation of life support requirements.

The more preferable draft rule is expected to reduce costs for life support customers when compared to current arrangements by enabling these customers to reuse their existing confirmation documents for the purpose of providing medical confirmation. As a result, life support customers as expected to enjoy greater flexibility to access retail energy markets.
The AEMC is a long-standing advocate for allowing consumers to shop around for the best deal they can get in the retail energy market.

Stakeholders are invited to provide feedback on the draft determination and draft rule by 14 January 2021.