On 19 December 2017, the AEMC made a final rule that promotes short-term reliability in the national energy market (NEM) by modifying the framework for the declaration of lack of reserve (LOR) conditions to be more flexible and transparent.

The final rule introduces a more flexible way for AEMO to declare lack of reserve conditions (LOR), allowing the system operator to move from the current contingency-based deterministic approach, to one that is probabilistic, while also maintaining the transparency of the existing framework.

The final rule is largely as proposed by AEMO with a number of amendments to address stakeholder feedback, including improving the transparency of the new framework and facilitating stakeholder education by introducing a  more robust consultation process and allowing for a reporting regime on the new arrangements. 

The key features of the final rule are:

• the removal of the three levels of contingency-based LOR definitions descriptions from the NER and replacement with a high-level description of lack of reserve condition
• the introduction of an obligation for AEMO to develop and publish reserve level declaration guidelines that set out how AEMO will determine a lack of reserve condition
• minimum requirements for the guidelines, including obliging AEMO to declare at least three probability levels that indicate an increasing level of probability
• the introduction of the factors that AEMO must take into account when assessing how to declare an LOR
• a requirement for AEMO to use an amended version of the rules consultation procedures when amending the guidelines
• a requirement for AEMO to report on the operation of the LOR framework every quarter.

The final rule improves the LOR framework since it will better predict the risk of load shedding, which will lead to more efficient outcomes on short-term reserves and promote reliability for consumers. 

On 1 August 2017 the AEMC received a rule change request from AEMO to amend the NER in relation to the definitions of LOR conditions in the NER. AEMO considers that the definitions of LOR levels are no longer appropriate for identifying risks in the power system, and so it sought to replace these with a system triggered by a wider range of risks than those presently allowed for in the definitions.

Consultation paper

A consultation paper was published on 22 August 2017 to facilitate discussion on the rule change request. The AEMC received 13 submissions to the consultation paper, which can be found below.

Draft determination

On 17 October 2017, the AEMC published its draft determination and draft rule which was as proposed by AEMO, with some amendments made to improve the transparency of the new framework. The AEMC received eight submissions as part of the second round of consultation, which can be found below.

The AEMC held a stakeholder workshop on 5 October 2017. In the workshop, AEMO provided summary of the background to the rule change request, its proposed solution, and an update on its project development. Slides for the workshop are available below.