On 29 February 2024, the Australian Energy Market Commission (AEMC) published a final report with twelve recommendations to improve the operation of the retailer reliability obligation (RRO).  

The RRO is one of several measures to support reliability in the national electricity market (NEM). It commenced on 1 July 2019. It was designed to encourage new investment in dispatchable energy technologies, essential for the reliable operation of the energy system. It does this by requiring retailers to establish contractual agreements with third parties when AEMO foresees a potential shortfall in energy supply.  

The recommendations in the final report aim to reduce the regulatory burden on retailers to comply with the RRO, which will reduce costs for consumers.

The final recommendations

The AEMC considered stakeholder feedback and experiences from the recent South Australia T-1 Reliability Instrument to identify twelve recommendations to improve the operation of the RRO.  

In summary, the recommendations are:

• Move the timeframes for when retailers must report their contracts to the Australian Energy Regulator (AER), so it is closer to the time of the relevant reliability gap. This will make it easier for retailers to determine the level of contracting required to comply with the RRO and will mean they can enter contracts with new projects that come online in the lead-up to a reliability gap.  
• Extend the timeframe for the Australian Energy Market Operator (AEMO) to request reliability instruments to cover forecast reliability gaps more effectively throughout the year.
• Remove the voluntary book-build mechanism, which is not being used, to simplify the National Electricity Rules (NER).
• Amend the Market Liquidity Obligation to ensure it continues to support market liquidity in South Australia.
• Maintain the existing definitions for liable entities and opt-in and the AER's role in assessing reliability instrument gap requests.
• Make changes to the National Electricity Law (NEL) and NER and review guidelines to address operational issues raised by stakeholders to reduce regulatory burden and deliver lower-cost opportunities for compliance.

Further reviews on the efficacy of the RRO and market liquidity

The Commission is aware of strong stakeholder support for a further review of the RRO's efficacy and market liquidity. We consider that the Commonwealth should take a holistic view of policy mechanisms and conditions that support reliability, including the RRO and market liquidity, as part of its work on the future market design.  

The AEMC's review of the operational aspects of the RRO is consistent with the 2018 decision Regulation Impact Statement (RIS) to the RRO.