On 17 April 2014, the AEMC (Commission) published a final (more preferable) rule and final rule determination in relation to the AER Authorisation of Software Changes by AEMO rule change request.

The final rule differs from the proposed rule in that while it removes the National Electricity Rules (NER) requirement on the Australian Energy Regulator (AER) to approve changes made by the Australian Energy Market Operator (AEMO) to the software required for the operation of the national electricity market (NEM), it does not insert a new requirement for AEMO to make software changes in accordance with its IT Change Management Procedures Manual.

Having had regard to the views of stakeholders in submissions to the consultation paper and draft rule determination, and having undertaken its own analysis and review, the Commission considers that the final rule will, or is likely to, contribute to the national electricity objective (NEO) by improving the regulatory design of AEMO and the AER’s responsibilities and improving administrative efficiency. Further, the Commission consider that the rule will, better contribute to the NEO than the proposed rule.

This is because it maintains the efficiency benefit as intended by the AER’s rule change request.

The Commission considers it appropriate to make this draft rule determination because:

• it will enhance administrative efficiency by removing from the NER a requirement for the AER to participate in a process that is not consistent with its broader statutory role and functions under the NEL; and
• it promotes good regulatory design by avoiding unnecessary and potentially duplicative regulation by recognising that the NEL and NER already provide a constraint on AEMO’s ability to make software changes which may be detrimental to the operation of the market.

Background

Under the NER, AEMO is required to obtain authorisation from the AER for any changes to its computer software required for the operation of the NEM.

The AER reviewed this obligation under the NER and reached the view that authorising each of AEMO’s software changes would be of little value, given the software change process in AEMO’s IT Change Management Procedures Manual.

Consequently the rule change request sought to amend the NER to remove this obligation, and proposed that a new obligation be placed in the NER under which AEMO would be required to undertake software changes in accordance with its IT Change Management Procedures Manual.

The AER considers that, if implemented, the rule:

• might impose a one off cost on AEMO as part of consulting with registered participants, but that cost would be minimal;
• would serve to codify the existing practice, which would become more streamlined and benefit all market participants as a result; and
• would not adversely affect market participants.

Commencement of rule change process

On 24 October 2013, the Commission published a notice under ss. 95 and 96 of the National Electricity Law (NEL) advising of its intention to commence the rule making process and the first round of consultation in respect of the rule change request. The notice further advised stakeholders of the AEMC's intention to subject the rule change request to the expedited rule making process under s. 96 of the NEL on the basis of it being a 'non-controversial rule'.  A consultation paper prepared by the AEMC identifying specific issues and questions for consultation was also published with the rule change request. Submissions closed on 21 November 2013.

Objections to the expedited rule change process

Three objections were received in relation to the rule change request proceeding through the expedited process. These stakeholders were generally of the view that the rule, if made, could have significant implications for market participants and therefore should not be considered as 'non-controversial'.

Consequently, the Commission was required to assess the objections to determine whether they were misconceived or lacking in substance. On 12 November 2013, the Commission made the decision that the objections were not misconceived or lacking in substance, and so decided that the rule change request should proceed through the standard rule change process. On 14 November 2013, a notice advising of this decision was published.

Submissions on the rule change request

Three submissions on the rule change request were received as part of the first round of consultation and are available below.

Draft rule determination

On 30 January 2014 the Commission published the draft rule determination and draft rule. Submissions on the draft rule determination closed on 13 March 2014. One submission was received from AEMO, which outlined the improvements it has made with regards to its IT change management processes. AEMO’s submission is available below.