Making an administered price compensation claim
The National Electricity Rules (NER) under clause 3.14.6 and the Australian Energy Market Commission (AEMC) compensation guidelines set out a process for market participants to claim compensation for any losses during an administered pricing period where the administered price cap (APC) or an administered floor price is applied. This page includes information about the administered pricing compensation process.
Eligibility to claim for compensation
Parties eligible to make a claim for administered pricing compensation are scheduled generators, non-scheduled generators, scheduled network service providers, scheduled loads, ancillary service providers and demand response service providers.
These parties can claim compensation if they supplied energy or other services during an administered pricing period and incurred a net loss. That is, their direct and/or opportunity costs exceeded their total revenue from the spot market over an entire “eligibility period” (the period from the first trading interval of a trading day where the spot price is set by the administered price cap, until the end of that trading day).
Opportunity cost is the value of the best alternative opportunity for eligible participants during the application of a price limit event or at a later point in time.
Making a claim
The rules, outlined in the APC compensation guidelines set out how participants can make a claim for compensation for direct costs and opportunity costs following the application of an APC. Claims will be assessed in accordance with the statutory timeframes.
The assessment process for direct and opportunity costs is set out in the guidelines. The process for assessing opportunity costs will take longer than direct cost process as it requires public consultation and consideration of appropriate methodologies for claims.
If a party decides to make a claim, the following applies:
- Please read the AEMC compensation guidelines.
- The claimant must provide notification in writing that it is making a claim within five business days of the end of the administered price event to both:
- See below for an example of a claim, however the following applies:
- This notification in writing will include the:
- administered price period and price limit event (Price limit events(s) refer to the actual trading intervals in which the spot price in a relevant region was either set by the administered price cap or reduced by scaling from an upstream region).for which the claim relates.
- Region in which the administered price period and price limit event applied.
- The notification will state whether the claim is a direct cost claim or a claim that includes opportunity costs.
- It is possible to claim direct costs and opportunity costs for the same price limit event.
- This notification in writing will include the:
- After receiving the notification to make a claim, the AEMC will publish a notice of receipt. The AEMC will then seek information from the claimant that we consider required to enable assessment of the claim - if the claim includes opportunity costs, this information must include the methodology used by the claimant to determine its opportunity costs.
- The claimant subsequently provides substantiation. The onus is on the claimant to provide evidence and justification. There is no set time period for this step. Any claims of confidentiality in respect of information provided by the claimant to the AEMC must be specified in the claim.
- The AEMC will commence formal assessment as soon as practicable after receiving sufficient information from the claimant. A notice will be published that formal assessment has started.
- The compensation processes differ depending on whether the claimant is seeking direct costs only, or also opportunity costs. Claims for opportunity costs will be subject to public consultation.
- The AEMC will consult with the claimant before making its determination. The claimant will be notified of the AEMC’s final decision as soon as practical.
The Guidelines set out standard timeframes, however, the AEMC will prioritise the processing of these claims as quickly as possible.
Example of a claim
An example of a valid claim is as follows;
Party: [Relevant eligible party name]
Category of registered participant: [e.g. scheduled generator]
Region: [e.g. NSW]
Administered price period and price limit event(s) that applied: [Start date and time, end date and time]
Type of compensation: [Direct costs/opportunity costs]
The AEMC’s assessment of administered pricing compensation will take into account any other compensation claimants have received, such as compensation due to market suspension pricing schedule periods, AEMO intervention events or compensation for directions.
Market Participant Obligations
Correspondence from the Australian Energy Regulator (AER) reminds market participants and scheduled generators of their obligations under the NER:
Market participants must not by any act or omission, whether intentionally or recklessly, cause or significantly contribute to the circumstances causing a direction to be issued, without reasonable cause.
Historical administered pricing compensation claims
The Commission has made one previous determination (Synergen Power, 2010) on a compensation claim under clause 3.14.6 of the Rules. The current compensation framework under clause 3.14.6 of the Rules differs from that at the time the Synergen Power determination was made.