On 28 November 2017 the AEMC made a final rule to change the settlement period for the electricity spot price from 30 minutes to five minutes, starting in 2021. Five minute settlement provides a better price signal for investment in fast response technologies, such as batteries, new generation gas peaker plants and demand response.
The final rule, which is a more preferable rule, will align operational dispatch and financial settlement at five minutes. This will reduce the time interval for financial settlement in the national electricity market from 30 minutes to five minutes.
Price signals that align with physical operations lead to more efficient bidding, operational decisions and investment. Over time, this flows through to lower wholesale costs, which should lead to lower electricity prices than in a market with 30 minute settlement. Wholesale costs make up around one third of a typical electricity bill.
Five minute settlement will start on 1 July 2021. This gives industry time to adjust to this major change which affects the spot and contract markets, metering and IT systems.
The timeframe balances the need to capture the benefits of moving to five minute settlement as soon as possible against the transitional costs and risks. It also gives industry a timetable for building and developing new fast response generation and technologies in preparation for the change in three years’ time – so this investment can start happening now.
The Australian Energy Market Operator (AEMO) will work closely with industry to develop an implementation plan, with policy guidance from the AEMC. The Australian Energy Regulator (AER) will monitor and report on the conduct of market participants and the effectiveness of competition throughout the transition.
This rule change was submitted by Sun Metals, a zinc refinery and large energy user.
On 19 May 2016 the Commission initiated its assessment of the proposed rule with the publication of a consultation paper for stakeholder comment.
On 22 August 2016 the Commission extended the period of time to make the draft determination on the rule change proposal to 30 March 2017, under section 107 of the National Electricity Law. The Commission considered the extension necessary due to the complexity of the issues raised by the rule change request and stakeholder submissions on the consultation paper.
Following requests from stakeholders, on 2 February 2017 the Commission extended the period of time to make the draft determination on the rule change proposal to 6 July 2017, under section 107 of the National Electricity Law. The Commission considered this second extension necessary to enable further consultation to better understand the costs and benefits of the proposal and implementation issues.
On 11 April 2017 the Commission published a directions paper to facilitate public consultation and assist stakeholders to make submissions on the rule change request. The directions paper provided details of how five minute settlement could be implemented, subject to stakeholder feedback on detailed costs and benefits. The Commission held a public forum to discuss the directions paper on 4 May 2017 in Sydney. Forty-three submissions were received on the directions paper.
On 4 July 2017 the Commission extended the period of time to make the draft determination on the rule change proposal to 5 September 2017, under section 107 of the National Electricity Law. The Commission considered this extension necessary to adequately consider the issues raised by stakeholders in submissions on the directions paper.
On 5 September 2017 the AEMC published a draft determination and a draft rule on the rule change request. Forty-one submissions were received on the draft determination.View less
|Draft amendment rule||Infographic|
|Fact sheet: How the spot market works||Information sheet|
|Indicative consolidated version of the NER||Notice - publication of draft determination|
|News announcement||Draft determination|
Public forum – 4 May 2017
|Information sheet: initiation||Consultation Paper|
|Notice: initiation||Rule change request|
|Information sheet: extension of time for draft rule determination (August 2016)||Notice: extension of time for draft rule determination|
|Australian Energy Council||CS Energy|
|ERM Power||Genex Power Limited|
|Hydro Tasmania||Infigen Energy|
|Intelligent Energy Systems Pty Limited||Liquid Capital|
|Major Energy Users||Snowy Hydro Limited|