Rule Change: Open

Overview

On 18 June 2020, the AEMC made a draft determination and rule to remove the current hierarchy for the use of intervention mechanisms, to improve AEMO's ability to manage the power system efficiently and flexibly.
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Draft determination and rule

On 18 June 2020, the AEMC made a draft determination and rule to remove the current hierarchy for the use of intervention mechanisms, to improve AEMO's ability to manage the power system efficiently and flexibly.

Currently the National Electricity Rules (NER) arrangements set out that in times of "supply scarcity", after dispatching all valid bids and offers, the Australian Energy Market Operator (AEMO) must use reasonable endeavours to first activate or dispatch the Reliability and Emergency Reserve Trader (RERT) and then, if necessary, issue either directions or instructions. This draft determination replaces this requirement with a principle that AEMO must use reasonable endeavours to select effective intervention mechanisms that minimise direct and indirect costs. 

The draft rule also extends transparency and accountability arrangements to encompass AEMO's decision making on the selection of intervention mechanisms. 

The draft determination includes transitional arrangements allowing the rule to come into effect prior to summer 2020-21.

The Commission is inviting submissions on its draft determination by 30 July 2020.

Background

On 28 November 2019, AEMO submitted a rule change request to the AEMC proposing that the requirement for AEMO to exercise the Reliability and Emergency Reserve Trader (RERT) before issuing directions or instructions be removed from the Rules and replaced by a principle requiring AEMO to endeavour to minimise the costs and maximise the effectiveness of an intervention in the NEM.

AEMO’s rule change request reflects the AEMC’s recommendations in its Investigation into intervention mechanisms in the NEM review. The review recommended a number of changes to the interventions framework that aim to reduce market distortion and costs to consumers while maintaining efficient price signals and incentives for investors when AEMO intervenes in the market.  
 

Fast track process

On 28 May 2020, the AEMC initiated the removal of intervention hierarchy rule change within the National energy rules (NER) through a fast-tracked process. 

The rule change request is being fast-tracked as stakeholder feedback on this issue was initially sought and received in 2019 as part of the AEMC’s Investigation into intervention mechanisms in the NEM. As such, the AEMC has now published a draft determination and draft rule, which is open to further stakeholder feedback. 

Related rule changes 

This draft rule is part of a package of seven rule changes being progressed by the Commission as part of its interventions work program. The other rule changes that comprise this work program are:

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Documentation

INITIATION

Proposal documents