The Australian Energy Market Commission (Commission) has today released a Final Rule Determination approving the Snowy Hydro Ltd Rule change proposal to abolish the Snowy region of the National Electricity Market (NEM).

This decision provides an efficient long term solution to the "legacy" problem of material and enduring network congestion in the Snowy region of the NEM. It represents the first significant change to the NEM pricing regions since the start of the market in 1998. The changes to the NEM regions - which place the Tumut generating plant in the New South Wales (NSW) region and the Murray plant in the Victoria region - will take effect on 1 July 2008.

In making this decision the Commission has concurrently assessed the merits of two alternative Rule change proposals: The Macquarie Generation proposal to split the Snowy region into two regions (the Split Snowy Region proposal), and the proposal from a group of market participants called the "Southern Generators" to make permanent the congestion pricing arrangements currently being trialled in the Snowy region (the Southern Generators' Congestion Pricing proposal).

The Commission's assessment has established that all three proposals represent significant improvements on the current enduring arrangements. Based on its analysis, economic modelling and consideration of stakeholders' views the Commission has concluded that the proposal to abolish the Snowy region is the best option of the three when assessed against the NEM objective and the Rule-making test. Consequently, the Commission has today also released draft determinations not to accept the Split Snowy Region proposal or the Southern Generators' Congestion Pricing proposal.

"The case for change to the Snowy region is strong, and this view has been widely supported by stakeholders. The Snowy region has been a source of inefficiency and economic distortions since the start of the NEM. The Commission's decision represents an enduring solution that will operate in the long term interests of the market, and of electricity consumers," said Commission Chairman, Dr John Tamblyn.

The Commission was also scheduled on 30 August to publish its draft findings in respect of two other significant pieces of work before it, relating to congestion in the NEM: a Congestion Management Review (CMR) directed to be undertaken by the Ministerial Council for Energy (MCE), and a Rule change proposed by the MCE to establish a new process for determining future changes to NEM pricing regions. Publication of these documents is now scheduled for 20 September. The decision to abolish the Snowy region solves the legacy congestion problem in the NEM. The CMR and the MCE proposal on future region change will set the long term framework for congestion management in the NEM. Collectively, these issues represent an important set of incremental reforms in the operation of the NEM.

Note (1): The group of generators known as the "Southern Generators" includes: Loy Yang Marketing Management Company, AGL Hydro, International Power, TRUenergy, Flinders Power, and Hydro Tasmania.

For information contact
AEMC Chairman John Tamblyn (02) 8296 7819

For background information contact
Hannah Cole (02) 8296 7800