On 17 November 2022, the Australian Energy Market Commission published a final determination and final rule on amending the administered price cap (APC) in response to a rule change request received from Alinta Energy. 

The AEMC has been reviewing the market settings ever since Australia’s wholesale electricity market was suspended in June 2022 following an extended period of unprecedented volatility and extreme prices. 

To protect Australians from these situations, the AEMC has decided to take a prudent, reasoned decision to increase the Administered Price Cap (APC) to a level that will reduce the risk of costly and dangerous blackouts, secure our electricity supply and keep the system stable as we transition to more renewable energy.

The APC can be thought of as a last-resort safety net which stabilises the electricity system by capping prices in the National Electricity Market during rare emergency situations, following a prolonged period of extreme prices. 

The final rule is transitional and changes the APC from $300/MWh to $600/MWh. It commenced on 1 December 2022 and will remain in place until 30 June 2025. The AEMC’s compensation guidelines were also updated on 1 December 2022 to reflect the final rule.

Any change to the setting longer-term will be made following the AEMC’s consideration of the Reliability Panel’s rule change request.

No temporary change to the cumulative price threshold (CPT) is being made as part of this final rule.

The rule change request

On 1 July 2022, the Australian Energy Market Commission (AEMC) received a rule change request from Alinta Energy to amend the National Electricity Rules. 

The rule change request seeks to amend the administered price cap (APC) to mitigate ongoing threats to the reliable operation of the NEM (National Electricity Market).

Commencement of the rule change process

The AEMC considered that the rule change request was a request for an urgent rule under section 87 of the NEL and initiated an expedited rule change process. The Commission published a consultation paper to facilitate stakeholder engagement on 4 August 2022.

Submissions to the consultation paper were due by 1 September 2022.

Objections to using the expedited rule change process

Under section 96(3) of the National Electricity Law (NEL), the AEMC must not make a Rule in accordance with the expedited process if the AEMC receives a written request not to do so, and the reasons set out in the request are not, in its opinion, misconceived or lacking in substance. 

On 18 August 2022, the Commission received five objections to not use an expedited process. A late objection was received on 19 August. The Commission considered the reasons outlined in the objections submitted and decided that the reasons provided in the requests are misconceived or lacking in substance.

Some of the objections received in relation to the project proceeding through the expedited process as an urgent rule have been published. The Commission’s reasons have also been published below.

Extension and Directions Paper:

On 8 September 2022, the Commission extended the date for publication of a final determination until 17 November 2022 under s.107 of the NEL, due to the complexity of the issues raised by stakeholders in submissions to the consultation paper. 

To allow for more extensive stakeholder consultation, the Commission has published a directions paper. The paper responds to stakeholder feedback on the consultation paper published in August 2022 and outlines a proposed policy position moving forward. The directions paper also outlines the Commission’s analysis of key issues considered. 

The key dates are as follows:

• 13 October 2022: Due date for submissions to the directions paper
• 17 November 2022: Commission publishes final determination and final rule (if made)

Correction:

The fifth paragraph on page 27 of the Consultation Paper and the associated footnote have been corrected to read:

Rule changes that are considered to be urgent may be processed under an expedited process under which there is only one round of consultation and the AEMC is required to publish its final rule determination within eight weeks of commencing the rule change process.45

45 The AEMC has published a notice under section 95 and section 96 of the National Electricity Law to commence and assess this rule change request as an urgent rule.