On 7 May 2015, the AEMC published a final rule to improve incentives for trading participants to efficiently supply and price contingency gas in the Short Term Trading Market (STTM).

The final rule is the same as the draft rule, and will come into force on 5 November 2015.

The final rule is broadly similar to the proposed rule, but provides greater clarity around how Australian Energy Market Operator (AEMO) will use the evidence that it requests from trading participants following a contingency gas trigger event.

The final rule will :

• enable trading participants to confirm or revise the quantity of each price step within a contingency gas bid or offer, and require participants to do so in good faith under existing requirements in the National Gas Rules. This additional flexibility in the bidding process will allow participants to better reflect the prices of different sources of contingency gas. This encourages efficient provision and pricing of contingency gas in times of emergency in the STTM.

• make all trading participants subject to the same evidentiary requirements following a contingency gas trigger event. The final rule will also allow AEMO to request evidence from participants to enable it to resettle contingency gas based on the quantity of gas provided and to assist it to prepare its reports following contingency gas trigger events.

This change to the evidentiary requirements will provide:

• greater certainty to trading participants in relation to what their evidence will be used for;
• greater transparency and accountability in the process for the resettlement of contingency gas; and
• more confidence for trading participants that they are only paying for contingency gas that has been delivered. 

• enable AEMO to extend the timeframe for its contingency gas trigger events report by up to a further 30 business days if needed to allow it to receive and consider evidence; and

• address minor drafting errors which associate "STTM storage facilities" with STTM Users in the National Gas Rules.

Background

Contingency gas can be considered as an emergency mechanism, which may be called on by AEMO to balance supply and demand if normal mechanisms in the STTM are unlikely to achieve this balance.

The use of contingency gas reduces the risk of supply issues for customers. To date, contingency gas has never been called for by AEMO.

AEMO proposed a rule to amend the National Gas Rules to facilitate changes to the process for confirming and settling contingency gas. AEMO stated that the changes are intended to improve incentives for trading participants to efficiently supply and price contingency gas by lowering financial risks through more flexible arrangements for confirming supply.

AEMO’s key proposed rule changes sought to:

• amend the National Gas Rules so that trading participants can confirm or revise individual  quantities of gas in specific price steps within a contingency gas offer or bid, rather than just the total quantity, and that they must provide information in good faith when doing so; and

• amend the evidentiary requirements for trading participants so that the detail on the provision of information on contingency gas is set out in the STTM Procedures.

AEMO also proposed changes to extend the time for it to prepare its reports following a contingency gas trigger event, and to correct minor drafting errors which associate "STTM storage facilities" with STTM Users.

The AEMC published a consultation paper on AEMO’s rule change request on 6 November 2014. Submissions closed on the consultation paper on 4 December 2014, with three submissions received.

The AEMC published a draft determination and draft rule on 12 February 2015, with submissions closing on 26 March 2015. The Commission received two submissions in support of the draft rule.