The Australian Energy Market Commission (AEMC) has delivered recommendations to improve national electricity market (NEM) compensation frameworks that help to ensure consumers are provided with reliable electricity at times when the market is under stress.
In a final report published today, the AEMC outlines proposed administrative, governance and methodology updates to the guiding compensation frameworks for market directions, market suspension and administered pricing.
AEMC Chair Anna Collyer said the final recommendations follow a review into compensation frameworks and the events of June 2022 when global and local factors culminated in the electricity market entering into an administered pricing period.
“Every day, our people at the AEMC are working towards the small and large scale improvements that will ensure the energy rules are fit for purpose as the geopolitical landscape evolves, climate changes and the market transforms on the journey to net zero,” Ms Collyer said.
“Efficient and effective compensation frameworks are essential for providing confidence to market participants to keep the NEM operating smoothly and reduce risk of outages during occasional periods of market stress.
“We have taken insights from the conditions that occurred in June 2022 and made a series of proactive updates to the frameworks that should promote greater energy security and reliability for consumers.”
The AEMC has made five key recommendations, with the aim to provide greater simplicity, consistency and clarity across compensation frameworks.
The changes include:
- specifying an objective for the directions compensation framework in the rules
- allowing participants to apply for opportunity costs in each compensation category
- improving the method for calculating directions compensation
- nominating AEMO to receive all compensation claims and assess them together with the independent expert, whose role in the claims assessment processes will be extended to assessing opportunity cost claims
- improving and clarifying administrative rules and timelines, including establishing time limits on the provision of information that will help ensure timely settlement of claims.
Ms Collyer said the recommendations take into consideration and complement the AEMC’s 2022 rule change to increase the administered price cap from 2025-2028 to facilitate greater reliability during market disruptions.
“Our final recommendations follow extensive consultation with consumer and industry stakeholders and combined with the 2022 change to the administered market price cap, they will provide the certainty the market needs to make decisions that will serve to bolster reliability.”
The AEMC looks forward to receiving rule change requests that would allow the current rules to be updated with the recommended improvements.
Please visit the project page for more information and contact details.
Media: Jessica Rich, 0459 918 964, media@aemc.gov.au