After a comprehensive review of the transmission arrangements that underpin the National Electricity Market, on 11 April 2013 the AEMC published the final report of the Transmission Frameworks Review.

The Commission recommended both short term reforms to facilitate more efficient connections between generators and transmission networks, and further development of a longer term access model for generators, termed Optional Firm Access (OFA).

Optional Firm Access

The Optional Firm Access model would provide generators with the ability to “insure” against the risk of congestion (when more generators wish to use transmission than can be accommodated). It would change the way generators access the market during times of congestion and the way transmission investment decisions are made.

The model enables better trade-offs to be made between the cost of transmission and the cost of generation. These trade-offs become more significant the greater the change from established fuel sources and transmission flowpaths.

The Commission has recommended that the model be progressed to a detailed design and testing stage, in order to insure against the possibility of a future that brings significant changes from current patterns of demand and generation.

Connections

The cost, complexity and time delays associated with connecting new generation to the market are a concern which the Commission considered could be addressed in the shorter term. Transmission businesses could be encouraged to make efficient trade-offs between the specification of connections and their cost. Ambiguity in the current rules also contributes to the problem.

The recommendations will increase competition in and transparency of the construction process for assets required for generator connection(s) to the shared transmission network. However, we also considered that there is a need to balance increased competition with the maintenance of clear accountability for outcomes on the shared network.

Background

On 20 April 2010, the Ministerial Council on Energy (MCE) directed the AEMC to conduct a review of the arrangements for the provision and utilisation of electricity transmission services in the National Electricity Market (NEM), with a view to ensuring that the incentives for generation and network investment and operating decisions are effectively aligned to deliver efficient overall outcomes.

The AEMC was to review the role of transmission in providing services to the competitive sectors of the NEM, through considering the following key areas together in a holistic manner:

• Transmission Investment;
• Network Operation;
• Network Charging, Access and Connection; and
• Management of Network Congestion.

The review stemmed from the Commission's previous Review of Energy Market Frameworks in light of Climate Change Policies. In the Final Report for that Review, the Commission recommended that further work be undertaken in relation to the efficient provision and utilisation of the transmission network. This reflected the Commission's finding that climate change policies will fundamentally change the utilisation of transmission networks over time, both between and within regions of the NEM, and that this would place stress on existing market frameworks.

On 28 May 2012 the SCER Chair wrote to the AEMC, extending the delivery date for the review’s Final Report to 31 March 2013.

Issues Paper

On 18 August 2010, the AEMC published an Issues Paper for the Transmission Frameworks Review which commenced the public consultation process for the review. The Issues Paper discussed key issues identified by the Commission and the process for the review. The purpose of this Paper was to seek stakeholder comments on whether the AEMC identified the scope of the issues appropriately, whether there were other issues that should be considered and which issues were the most material.

The Commission was particularly interested to understand the experiences of market participants of operating within the current transmission frameworks. As such, in responding to the Issues Paper, parties were encouraged to provide clearly argued, evidence-based submissions where possible.

Submissions to the Issues Paper closed on 29 September 2010. The submissions highlighted the complexity and long-standing nature of the issues associated with transmission networks, and revealed a diverse range of views on the robustness of current transmission frameworks and their interaction with the generation sector.

Directions Paper

On 14 April 2011, the AEMC published a Directions Paper for the Transmission Frameworks Review. The Directions Paper considered the broad range of issues previously raised by stakeholders and provided a framework for how the AEMC would consider these issues. The paper identified five key themes, including:

• the nature of access;
• network charging;
• congestion;
• transmission planning; and
• connections.

Although the paper did not pose any specific questions, the AEMC sought comments from stakeholders on the way it had framed the issues, and whether this represented an appropriate structure for resolving them.

Submissions to the Directions Paper closed on 26 May 2011. Submissions continued to demonstrate the wide range of views held by stakeholders on the workability and efficiency of current arrangements.

First Interim Report

On 17 November 2011 the AEMC published the First Interim Report for the Transmission Frameworks Review. The report set out five alternate paths for reforming the role and provision of transmission networks. These ranged from packages that are similar to the current arrangements, whereby generators are not entitled to a defined level of transmission service but are not required to pay for network use, to packages that redefined the rights that generators have to use the transmission network.

The First Interim Report also set out options for enhancing the planning and connection arrangements, which could apply under the current or alternative arrangements.

The Commission did not identify any preferred options at that stage of the review.

Submissions to the First Interim Report closed on 27 January 2012. Submissions were received from 26 organisations, representing a very high level of stakeholder engagement which informed the next stage of the review.

Second Interim Report

On 15 August 2012, the AEMC published the Second Interim Report for the Transmission Frameworks Review. The report addressed three broad areas of transmission arrangements:

• generators’ certainty of access to their regional reference price;
• planning frameworks; and
• arrangements for connecting to the network.

The Second Interim Report considered further the proposals that were presented in the First Interim Report, but narrowed the five options for generator access to two alternative paths. The first alternative reflected current arrangements, while the second path – a model of optional firm access – suggested a more market-oriented approach to the procurement, operation and use of transmission networks.

The Second Interim report also set out the Commission’s proposals for improving planning and connection arrangements.

Submissions to the Second Interim Report closed on 10 October 2012. Submissions were received from 36 organisations which informed the next stage of the review.

Consultative Committee

In accordance with the direction from the MCE, the AEMC established a Stakeholder Consultative Committee with its membership comprising representatives from AEMO, the AER, industry groups and representatives from electricity networks, electricity generators (including renewable generation), electricity retailers and energy end user groups.

The purpose of the Consultative Committee was to provide technical advice to the AEMC, as well as to comment on the analysis and recommendations made by the AEMC throughout the review. The first meeting of the Consultative Committee was held on 26 July 2010. Subsequent meetings were held on 10 December 2010, 7 March 2011, 28 September 2011, 18 April 2012, and 21 November 2012. A synopsis of each of these meetings can be found in the Initiation section below.

Web Forum

The Transmission Frameworks Review generated considerable debate on the current issues and the future challenges for transmission in the NEM. In particular, this led to a number of stakeholders submitting supplementary papers to us after the conclusion of the various rounds of formal consultation.

In response to this high level of interest, and to facilitate further analysis and discussion in addition to the formal consultation process, we established a web forum for the Transmission Frameworks Review. This provided an opportunity for stakeholders to contribute further to the review by providing us (and other stakeholders) with relevant papers and consultancy reports that could be published.