The Australian Energy Market Commission (AEMC) made a final rule on 7 March 2024 in response to a rule change request from the Energy Ministers Sub-Group (Energy Ministers). Energy Ministers asked the AEMC to amend the National Gas Rules (NGR) to improve the compensation framework for Australian Energy Market Operator (AEMO) directions in the East Coast Gas System (ECGS).

Our final rule supports security, reliability and supply adequacy in the ECGS

Energy Ministers identified a number of issues with the existing framework in terms of clarity, consistency, efficiency and effectiveness. The final rule addresses these issues by making amendments to Parts 15C, 19, 20 and 27 of the NGR:

• The final rule establishes a new compensation framework in the NGR. Our final determination is to establish a separate framework for the assessment of compensation claims (by establishing two new divisions in Part 15C of the NGR). This means separating the current dispute resolution arrangements from the arrangements for determining compensation claims. We have modelled the new arrangements on the expert determination framework for the assessment of electricity compensation claims under chapter 3 of the NER.

• The final rules refines the framework for compensation of AEMO directions in the ECGS: The arrangements for AEMO directions in the ECGS in Part 27 of the NGR set out the circumstances in which a compensation claim may be made, what costs can be claimed and who funds the compensation. The Commission’s final determination:

  -limits the costs that are eligible for compensation to direct costs only, to incentivise market supporting behaviour before an AEMO direction

  -inserts principles into the NGR to guide AEMO’s cost recovery methodology for compensation claims under Part 27 (these largely align with the current demand-driven approach adopted by AEMO, with some amendments)

  -inserts a new rule to support appropriate behaviour in response to an AEMO direction and deter unwanted behaviour, i.e. prohibits the intentional or reckless exacerbation of costs in response to an AEMO direction without reasonable cause, but without capturing legitimate business decisions having regard to legitimate business interests

  -increases the minimum claim threshold to $50,000 and does not allow for different entities to join claims.

• The final rule includes consequential changes to rules governing the DWGM and STTM: The Commission’s final determination is to make consequential changes to Parts 19 and 20 of the NGR to apply the new compensation framework under Part 15C to compensation claims under those Parts arising from AEMO directions and intervention, market suspension and administered pricing. Claims relating to unintended scheduling results under Part 19 or scheduling errors under Part 20 continue to be assessed under the existing dispute resolution framework.
   
• The final rule does not change the existing dispute resolution provisions: The Commission’s final determination is to not make any changes to the existing dispute resolution provisions.

Background 
 

Over the past year there have been a number of changes to the ECGS to address security and reliability threats and better manage volatility in the system. This includes Energy Ministers providing AEMO with obligations to monitor the system, as well as intervene should this be required.