Rule Change: Open

Overview

On 15 August 2019, the Commission published a draft determination in relation to the threshold for participant compensation following market intervention.
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On 15 August 2019, the Commission published a draft determination in relation to the threshold for participant compensation following market intervention.

The Commission has made a draft determination to make a more preferable rule in which the change to the $5,000 threshold is made in relation to directed participants’ additional cost claims but not in relation to the compensation payable to affected participants. 

The Commission’s draft rule:

  • amends the compensation threshold in relation to directed participant additional compensation claims so that it applies per direction and not per trading interval, enabling directed participants to recover the costs they incur when providing a service under direction
  • does not change the threshold as it relates to affected participant compensation, given that the Commission is recommending that affected participant compensation only be payable in respect of interventions which trigger intervention pricing under the revised regional reference node test. 

The Commission invites submissions on this draft rule determination, including a more preferable draft rule, by 26 September 2019.

Background – rule change request

When the Australian Energy Market Operator (AEMO) intervenes in the market by issuing a direction, it is required to compensate market participants who are directed to provide services. AEMO is also required to compensate those participants who are “affected”, or dispatched differently, due to the intervention so as to put them in the position they would have been in but for the intervention. 

Compensation for directed participants is calculated automatically in the first instance. However, if a directed participant is still out of pocket, it can lodge a claim for additional compensation. At present, a threshold of $5,000 per trading interval applies to these additional compensation claims. This means a directed participant could incur loss if its costs are below the threshold in a given trading interval, even if total costs incurred during the intervention are well above the threshold.

The same threshold applies to the payment of affected participant compensation – both in the first instance, where compensation is calculated automatically, and in the event that an affected participant claims further compensation.

On 17 December 2018, AEMO submitted a rule change request to the Commission seeking to amend the threshold for participant compensation following market intervention. In particular, AEMO proposes that the threshold should apply per intervention event, rather than per trading interval.

On 4 April 2019, the AEMC initiated the rule making process for the rule change request.

The AEMC has made draft determinations with respect to this rule change request and the Application of the regional reference node test to the RERT rule change request. These draft determinations accompany the AEMC's final report on its Investigation into intervention mechanisms in the NEM. The final report includes a number of additional recommendations on changes to the intervention and compensation framework.

The Commission has made a more preferable draft rule which changes the participant compensation threshold so it applies per direction in the case of directed participant additional compensation claims. However, the more preferable draft rule makes no change to the threshold as it applies to affected participants.

This is because, in the final report of the Investigation into intervention mechanisms, the Commission recommends that eligibility for affected participant compensation be narrowed significantly. As such, it would not be appropriate, or in the interests of consumers, to increase the payment of affected participant compensation by changing the threshold in the manner proposed.

Further information on the broader investigation can be found here.
 

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