The Australian Energy Market Commission (AEMC) has published a consultation paper on the Reliability Panel’s (Panel) rule change request to change the market price settings to the levels recommended in the 2022 Reliability Standard and Settings Review. Further information on the Reliability Standard and Settings review can be found here.

The Panel proposes to increase the Market Price Cap (MPC), Cumulative Price Threshold (CPT) and Administered Price Cap (APC) for the period 1 July 2025 to 30 June 2028 (the review period). The Panel’s recommendations are to:

• progressively increase the MPC and CPT to reach the level required to incentivise new entrant investment, consistent with the reliability standard, by the final year of the review period.
• Increase the APC to a level necessary to avoid undue reliance on compensation processes during an administered price period, and avoid the need for future market suspension, similar to the events of June 2022. This recommendation was made prior to the AEMC’s Amending the administered price cap rule change, which came into effect in December 2022.

The AEMC is seeking views on the following issues in its consultation paper:

1. Whether stakeholders agree with the Panel’s recommendations for changes to the market price settings.
2. Whether there are other considerations the Commission should make when assessing this rule change request.
3. Whether stakeholders agree with the Commission’s proposal for how it will assess this request.

Stakeholders are encouraged to comment on these issues, the costs and benefits associated with the proposed changes and solutions, as well as any other aspect of the rule change request or consultation paper. Submissions are due by 22 June 2023.

Background

The proposed changes stem from the Panel’s 2022 Reliability Standard and Settings Review (RSS Review).

The National Electricity Market (NEM) will require a significant amount of new investment in generation, demand response, and network capacity to supply consumers with the energy they demand as the incumbent thermal generation fleet progressively retires from service.

To support this investment, key signals can be derived from various market price settings, including the market price cap (MPC), cumulative price threshold (CPT) and administered price cap (APC).

The Reliability Panel (Panel) is tasked with reviewing and recommending the market price settings every four years, with any recommended changes then being considered by the AEMC in a rule change.

The Panel’s 2022 RSS Review was completed in September 2022 and involved significant stakeholder engagement and detailed quantitative analysis. This rule change is also part of a broader program of work on the reliability framework being completed by the AEMC and other market bodies and jurisdictions.