The Australian Energy Market Commission (AEMC) has made a final rule to enable the Australian Energy Market Operator (AEMO) to better respond to and manage the risk of reduction in supply for Victorian gas users that may arise due to the tight demand-supply conditions expected from 2023 to 2025.
The final rule provides an interim solution to the low levels of contracted capacity at the Dandenong liquefied natural gas (LNG) storage facility observed since 2019 by requiring AEMO to act as a buyer and supplier of last resort to ensure AEMO does not crowd out other participants.
The final rule also sets out the contractual, cost recovery, proceeds distribution, accountability and transparency arrangements that will apply to the buyer and supplier of last resort roles over this period.
These measures are intended to reduce the risks to the safety, security and reliability of gas supply in Victoria and support the efficient operation of the declared wholesale gas market (DWGM) over 2023-2025.
Under the rule, AEMO will be able to manage threats to system security in the DWGM more effectively through the use of the Dandenong LNG facility, even if market participants do not contract for LNG capacity themselves.
The rule was made in response to a rule change request submitted by the Victorian Minister for Energy, Environment and Climate Action (Victorian Minister) on 8 August 2022. The rule change request was one of the priority actions that was agreed to by Energy Ministers on 8 June 2022, as they acknowledged the critical role of gas storage facilities.
The final rule will be in operation from 2023 to 2025 while the Energy Ministers' gas market supply adequacy and reliability reform program is undertaken.