The AEMC has made a final rule that simplifies risk management for market participants and improves wholesale gas prices in the Victorian Declared Wholesale Gas Market (DWGM).
The DWGM enables producers, large gas users and retailers to bid to make withdrawals from and injections into the main system for transporting gas in and through Victoria.
By simplifying risk management, the rule may encourage trade and competition, and reduce regulatory and administration burden for market participants and the Australian Energy Market Operator (AEMO).
The final rule requires AEMO to take physical constraints on withdrawals of gas into account when setting the pricing schedules that determine market prices. This will result in pricing schedules that better align with the physical capability of the system and reduce uncertainty and scheduling risk for market participants.
The final rule also removes the link between authorised maximum daily quantity (AMDQ) or capacity certificates and uplift payments, such that a congestion uplift category is no longer required.
The final rule retains the current principle that uplift payments are to be allocated so far as practicable to market participants that caused the need for ancillary payments.
However, it removes rules that require AEMO to take into account the extent to which a market participant's use of gas is in excess of a baseline derived from AMDQ or capacity certificates. The Commission considers that such a baseline-based congestion uplift mechanism does not appropriately allocate 'cost to cause' and would involve unwarranted complexity and cost. The principle of allocating cost to cause so far as practicable can be achieved through the other categories of uplift set out in AEMO's uplift payment procedures.
In deciding to make this final rule, the Commission has taken into account interactions with the final rule for the separate rule change on DWGM improvement to AMDQ regime, also published on 12 March 2020 .
For information contact:Director, Owen Pascoe (02) 8296 7856
Media: Kellie Bisset, Media and Content Manager, 0438 490 041 or (02) 8296 7813