Rule Change: Open

Overview

This rule change request from AEMO seeks to amend the threshold for participant compensation following market intervention, for example when AEMO directs a generator to operate. In particular, AEMO proposes that the threshold should apply per intervention event, rather than per trading interval.
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On 15 August 2019 the Commission published 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 the Commission’s  recommendation in the final report of the Investigation into intervention mechanisms in the NEM that affected participant compensation only be payable in respect of interventions which trigger intervention pricing under the revised regional reference node test. 

Submissions on the draft rule determination closed on 26 September 2019 and can be found below.

Extension

On 24 October 2019 the Commission extended the timeframe for publishing a final determination and rule until 19 December 2019.

The extension will enable the AEMC to align the final determination with a related rule change request from AEMO on the application of compensation in relation to AEMO interventions which was received on 19 September 2019 and is also due to be finalised on 19 December 2019 (under an expedited process). This rule change request seeks to narrow the circumstances in which compensation is payable to affected participants in connection with an AEMO intervention event.

Given that AEMO has now submitted this rule change request, the Commission can resolve the question of how the $5,000 compensation threshold should apply to affected participants - and not just to directed participants - in the final determination.

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 published a consultation paper on the rule change request.

On 15 August 2019 the Commission published draft determinations on this rule change request and the Application of the regional reference node test to the RERT rule change request. These draft determinations accompanied 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.

Further information on the broader interventions investigation can be found here.

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Documentation