The Australian Energy Market Commission today made a final decision on amendments to the Compensation Guidelines. These guidelines describe how compensation is to be determined if a claim is made by an eligible party following the application of an administered price period.
Administered price caps and administered floor prices help to reduce volatility and manage risks for market participants, but in some cases they can cause market participants to incur a loss. The National Electricity Rules provide for compensation in some circumstances where these losses occur. Historically, administered pricing events have occurred rarely.
The AEMC recently made changes to the National Electricity Rules which include transitional arrangements. These required the Compensation Guidelines to be amended to reflect changes to the rule, prior to the commencement of that rule on 29 September 2016. As well as making these consequential changes, the AEMC has made other changes to the Compensation Guidelines, including:
amending the definition of opportunity cost;
amending the criteria for assessing whether opportunity costs can be claimed;
amending the methods of valuing opportunity costs; and
amending the frequency with which the Compensation Guidelines are reviewed.