Rule Change: Completed
Overview
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.
Next steps
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.
Background
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.
On 28 November 2017, the AEMC published a final determination and final rule on the rule change request. Please note that that due to a technical error the previous version of the final rule published on this website was not the version approved by the Commission and included three errors that were corrected before the rule was approved. Details of those errors are provided on the cover page of the final rule published on this page.
Note: Schedules 1 to 6 of the National Electricity Amendment (Five Minute Settlement) Rule 2017 No. 15 will commence operation on 1 October 2021 as a result of the amendments made under the National Electricity Amendment (Delayed implementation of five minute and global settlement) Rule 2020 No. 10.