On 20 February 2014, the AEMC published its final report on its review of the Australian Energy Market Operator’s (AEMO) management of negative inter-regional settlements residues (IRSRs). The AEMC considered that current arrangements are broadly appropriate and proposed some minor changes.

The AEMC’s final recommendations are that:

• the current threshold of $100,000 for intervention should be retained as the evidence does not support increasing or decreasing it;
• there is benefit in AEMO investigating and consulting on alternatives to current arrangements with the aim of reducing the incidence of the repeated application and release of the clamp within a trading day;
• AEMO should communicate to stakeholders its basis for how increments are set when a clamp is applied or released;
• where possible, AEMO should publish its estimate of the negative IRSRs within a current trading interval in real-time; and
• AEMO's use of the metered interconnector flow from the beginning of the previous dispatch interval to estimate the most recent value of the negative IRSRs within a current trading interval is appropriate.

The AEMC has not proposed to change the National Electricity Rules.

Background

Under clause 3.8.10(g) of the National Electricity Rules, the AEMC is required to review AEMO’s management of negative IRSRs. This clause was introduced under the Arrangements for Managing Risks Associated with Transmission Network Congestion rule change request. This rule change request was based on a recommendation from the AEMC’s Congestion Management Review, which was completed in 2008.

The scope of the review covered the:

• efficiency of AEMO’s current policy and practice of managing negative IRSRs, including the ‘clamping’ of negative IRSRs when their value reaches $100,000; and
• appropriateness of the $100,000 intervention threshold.

The AEMC has not reviewed negative IRSRs generally; rather, it specifically reviewed AEMO’s management of negative IRSRs.

On 18 April 2013, the AEMC published an issues paper on this review. The issues paper set out the context and key issues for the review and, based on a set of consultation questions, invited submissions from stakeholders. Submissions closed on 31 May 2013 and 9 submissions were received.

On 24 October 2013, the AEMC published a draft report on this review. This report set out the AEMC’s draft findings. Submissions were due on 6 December 2013 and 4 submissions were received.