On 14 September 2023, the Australian Energy Market Commission (AEMC) made a more preferable draft rule to amend the market price cap (MPC), cumulative price threshold (CPT) and administered price cap (APC).

The more preferable draft rule:

• sets the MPC and CPT at the level recommended by the Reliability Panel (Panel) in the 2022 Reliability Standard and Settings Review (RSS Review) adjusted for inflation.
• sets the APC at $600/MWh, which is different from the Panel’s recommendation of $500/MWh but consistent with its current value.

Submissions to the draft determination are open until 26 October 2023.

Background

On 16 November 2022, the AEMC received a rule change request from the Reliability Panel to change the market price settings to the levels recommended in the 2022 Reliability Standard and Settings Review.

The Panel proposed an increase to the MPC, CPT and APC for the period 1 July 2025 to 30 June 2028 (the review period).

The Panelrecommended:

• progressively increasing the MPC and CPT to reach the level required to encourage new entrant investment, consistent with the reliability standard, by the start of the final year of the review period.
• Increasing the APC to a level necessary to avoid undue reliance on compensation processes during an administered price period, and avoid the need for future market suspension, similar to the events of June 2022. This recommendation was made prior to the AEMC’s Amending the administered price cap rule change, which came into effect in December 2022.

The National Electricity Market (NEM) will require significant new investment in generation, demand response, and network capacity during the transition to a low-emission supply sector to supply consumers with the energy they demand as the incumbent thermal generation fleet progressively retires from service.

To support this investment, the various market price settings, including the MPC, cumulative price threshold CPT and administered price cap APC provide key signals and incentives.

The Reliability Panel is tasked with reviewing and recommending the market price settings every four years, with any recommended changes then being considered by the AEMC in a rule change.

The Panel’s 2022 RSS Review was completed in September 2022 and involved significant stakeholder engagement and detailed quantitative analysis. The Commission's consideration of this rule change is part of a broader program of work on the reliability framework being completed by the AEMC, other market bodies and jurisdictions.

Consultation paper

On 11 May 2023, the AEMC published a consultation paper seeking feedback on the Panel’s proposed rule change. Submissions closed on 22 June 2023 and are published below.