Rule Change: Completed

Overview

On 25 August 2011, the Commission made its final Rule determination for the Various Hedging Instruments in the Declared Wholesale Gas Market Rule change request which was submitted by the Australian Energy Market Operator.

This determination includes a Rule as Made which will enable participants in the Declared Wholesale Gas Market (DWGM) to better manage their financial risks.

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On 25 August 2011, the Commission released a final Rule determination, including a Rule as Made, to enable participants in the Declared Wholesale Gas Market (DWGM) to better manage their financial risks. This Rule was made in response to a rule change request submitted by AEMO.

This Rule applies to the DWGM - a market for the wholesale trading of natural gas in Victoria. Its key purposes are:

  • to allow DWGM participants to renominate their authorised MDQ and AMDQ credits (collectively called AMDQ) between system injection points that are close proximity injection points during the gas day;
  • to allow DWGM participants to renominate their Authorised Maximum Interval Quantity (AMIQ) profiles during the gas day for future scheduling intervals in that gas day;
  • to provide for DWGM participants to nominate injection hedges (IHNs) and agency injection hedges (AIHNs) collectively to close proximity injection points (CPPs) rather than to system injection points; and
  • to push back the timeframes for DWGM participants to submit IHNs, AIHNs and AMIQ profiles to AEMO so that they must be submitted by one hour before the start of the gas day.

The Commission decided to make a Rule reflecting AEMO's proposed policy as it considered the proposal was likely to contribute to the achievement of the National Gas Objective. In particular, the Commission considered that the proposal was likely to lead to price benefits for consumers of natural gas as:

  • it would enhance the ability of DWGM participants holding AMDQ to manage their financial risks, potentially lowering their risk management costs which may lead to lower costs for end-use consumers. This is because it would provide these participants with greater scope to manage their imbalance and congestion uplift charges by:

- increasing the flexibility with which they can use their AMDQ:

- allowing them to better optimise the use of their AMIQ profiles; and

- increasing the flexibility with which they can offer AIHNs to other participants.

  • it may enhance competition among DWMG participants holding AMDQ to inject gas into the DWGM, potentially leading to more efficient operation for DWGM participants, reduced wholesale prices in the DWGM which may lead to lower costs for end-use consumers.

Background

On 18 November 2010, AEMO submitted this Rule change request to the Commission. In making the Rule change request, AEMO sought to increase the flexibility with which participants in the DWGM can use AMDQ and AMIQ profiles to manage financial risk.

AEMO stated that the Rule change request sought to enable DWGM participants to use market hedging instruments more effectively and therefore more efficiently manage their trading risks.

Rule change process

The Commission undertook public consultation on the Rule change request and invited submissions by 24 March 2011. One submission was received from Origin Energy, which supported the Rule change request.

On 2 June 2011, the Commission published a draft Rule determination, including a draft Rule, and invited submissions by 14 July 2011. During this second round of consultation, no submissions were received and no public hearing was requested.

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Documentation

INITIATION

AEMC documents

Proposal documents

Submissions on Consultation Paper