The AEMC today initiated work on a rule request from AEMO which seeks to increase consistency in the treatment of market participants when AEMO intervenes to maintain security and reliability.

The rule request proposes to extend the regional reference node test (RRN test), which is used by AEMO to determine whether to apply “intervention pricing” when it issues a direction (a form of market intervention).  Intervention pricing is used to minimise market distortion arising from intervention events to maintain security and reliability. It does this by preserving the price signals that would have been seen by the market but for the intervention.

AEMO’s proposal is that the RRN test should apply to the reliability and emergency reserve trader (RERT), in addition to directions. This would increase consistency within the interventions framework and avoid the higher costs that can flow from intervention pricing when the application of this pricing approach is not warranted (e.g. if the RERT is activated to address a localised rather than region-wide issue). AEMO also proposes that the wording of the test be amended to improve clarity.

This rule request is being progressed as part of the AEMC’s investigation into intervention mechanisms and system strength in the NEM. Having regard for the issues raised by the AEMO rule request, and taking into account the increased use of directions in South Australia, the investigation considers when intervention pricing should apply, and whether the current RRN test is achieving its objective of reducing market distortion in connection with intervention events.  Further information on this can be found here.

Media: Prudence Anderson, Communication Director, 0404 821 935 or (02) 8296 7817