Allowed localised Regulation service costs to be recovered locally, rather than from the entire NEM.

Background

The Commission received a Rule change proposal on 7 September 2006 from National Generators Forum which seeks to create a NEM wide scheme for the recovery of costs of “regulation services” (as defined in Chapter 10 of the Rules) where abnormal circumstances result in a local requirement for these services. The proposal intends to remove the existing participant derogation for the recovery of localised regulation services in Tasmania.

On 21 December 2006, the Commission published a notice under section 95 of the (NEL) commencing initial consultation on a Rule proposal for Cost Recovery of Localised Regulation Services.

The Commission invited interested parties to provide submissions on the Rule proposal by 22 February 2007.

On 5 April 2007, the Commission published a notice under section 107 of the NEL extending the period of time for making its draft Rule Determination on the Rule proposal for Cost Recovery of Localised Regulation Services. The Commission considered that NEMMCO’s draft report of the review of the operation and effectiveness of the Frequency Control Ancillary Services markets was likely to be relevant to the Commission’s consideration of this Rule change proposal and submissions received during first round consultation. Accordingly, the Commission considered it was in the public interest that the relevant period of time for making its draft Rule Determination be extended.

On 17 May 2007 the Commission published a notice under section 99 of the NEL giving notice of the making of the draft Rule Determination for this proposal. The draft Rule Determination fundamentally accepted the NGF’s proposal subject to some enhancements and modifications, including:

• An amendment to clause 3.9.2A of the Rules to remove the references to regulating raise service and regulating lower service;
• Amendments to clause 3.15.6A(h)(1) to require the allocation under clause 3.15.6A(a) to be undertaken for each of the regulating raise services and regulating lower services;
• Deleting the words “requirement” and “requirements” from the definitions of the terms used in the formulae in clauses 3.15.6A(i)(1) and (2); and
• Inserting new principles at sub-paragraphs (3) and (5) of clause 3.15.6A(k), thereby providing additional guidance to NEMMCO in the development of its procedure for determining causer pays factors.

The reasons for the Commission’s decision are contained in the draft Rule Determination.

The Commission invited submissions on the draft Rule Determination and draft Rule by 29 July 2007. Requests for a hearing were required by 24 May 2007.

On 26 July 2007, the Commission published a notice under section 107 of the NEL extending the period of time for making its final Rule Determination. Following the close of submissions on 29 June 2007, the Commission sought clarification from the NGF about matters raised in its submission and sought additional information from NEMMCO. The Commission considered that the information to be provided by NEMMCO represented a material change in circumstances and was likely to be relevant to the Commission’s consideration of the Rule change proposal. The Commission considered it was in the public interest that the relevant period of time for making its final Rule Determination be extended to 23 August 2007.

The Commission gave notice on 23 August 2007 under sections 102 and 103 of the National Electricity Law (NEL) of the making and commencement of the National Electricity Amendment (Cost Recovery of Localised Regulation Services) Rule 2007 No.5 and the corresponding Rule Determination. The Rule Determination affirms the Commission’s draft Rule Determination with some amendments to enhance the efficacy of the process of recovering the cost of regulation FCAS requirements on a regional basis. The Rule commenced on 1 January 2009.