On 10 December 2015, the AEMC made a final rule to enhance the arrangements that govern generator’s offers in the wholesale electricity market.

The final rule will amend the relevant provisions in the National Electricity Rules as follows:

• The current requirement that offers be made in good faith will be replaced by a prohibition against making false or misleading offers.
• Any variations to offers will need to be made as soon as practicable.
• A requirement to preserve a contemporaneous record of the circumstances surrounding late rebids will be introduced.

The Commission’s final rule is a more preferable rule which adopts elements of a rule change request submitted by the South Australian Minister for Mineral Resources and Energy.

The Commission’s assessment of the rule change request has required a broad consideration of the issues raised, including those related to the offering behaviour of generators and the design of the bidding process. The assessment has also involved an investigation of the materiality of the issues and the extent to which they have impacted on market outcomes.

Background

The National Electricity Rules require that generators make all bids and rebids in good faith such that, at the time of making the bid, the generators must have a genuine intention to honour that bid if the material conditions and circumstances upon which the bid is based remain unchanged. The Australian Energy Regulator is responsible for ensuring compliance with the good faith provisions.

The rule change request proposed changes to the good faith provisions that would recast the good faith provisions in the negative such that generators would be required to demonstrate what material circumstances had changed as the basis for their rebid. In addition, the proposed rule would require generators to take into account all existing material circumstances when making a bid and, if there is a change to any of those material circumstances, to reflect those changes in rebids as soon as practicable.

These proposed changes were intended to provide clarity to the interpretation of the good faith provisions and improve the accuracy and reliability of the Australian Energy Market Operator’s forecasts, consistent with what the proponent considers to be the original policy intent of the provisions.

On 10 April 2014, the Commission initiated its assessment of the proposed rule with the publication of a consultation paper for stakeholder comment.

On 5 May 2014, the Commission held a stakeholder forum in Melbourne to facilitate initial discussion on the key issues in the rule change request. Documents from the forum including stakeholder presentations are provided below. Stakeholder views on the Australian Energy Regulator’s rule change request on generator ramp rates and dispatch inflexibility in bidding were also discussed as part of the stakeholder forum. Further details on this rule change request can be found here.

On 31 July 2014, the Commission decided to extend the period of time to consider the rule change request under section 107 of the National Electricity Law. The Commission considered the extension necessary due to the complexity of issues raised by the rule change request, as reflected in the extensive stakeholder submissions on the consultation paper and views expressed at the stakeholder forum.  The AEMC extended the period of time for publication of the draft determination to 16 April 2015.

On 18 December 2014, the AEMC published an options paper to facilitate consultation on the rule change request. The purpose of the options paper was to discuss the outcomes of analysis undertaken for the Commission, to test stakeholders’ views on a number of alternative potential options identified to address the rule change request, and to continue the assessment of the proposed rule.

On 16 April 2015, the AEMC made a draft rule to enhance the arrangements that govern generator bidding behaviour in the wholesale electricity market. On 18 May 2015, a public forum was held in Brisbane to provide an opportunity for interested stakeholders to share their views on the draft rule, followed by an additional round of consultation with submissions closing on 11 June 2015.

On 23 July 2015, the Commission decided to further extend the period of time to consider the rule change request under section 107 of the National Electricity Law. The Commission considered the extension necessary due to the complexity of issues raised by the rule change request and by stakeholders in their extensive submissions on the first draft determination and at the public forum. The revised project timeline included publication of a second draft determination by 17 September 2015.

On 17 September 2015, the AEMC made a second draft rule to enhance the arrangements that govern generator bidding behaviour in the wholesale electricity market. This was followed by an additional round of consultation, with closing on 29 October 2015.