On 8 September 2022, the Australian Energy Market Commission (AEMC) made a final rule that amends the National Gas Rules (NGR) to allow the participation of distribution connected facilities in the Victorian gas market. 

The final rule will come into effect on 1 May 2024.

Final rule determination 

The final rule amends the NGR by allowing distribution connected facilities to register and directly participate in the Victorian declared wholesale gas market (DWGM), being treated on an equivalent basis to transmission connected facilities. 

However, some modifications have been made to recognise that these facilities are connecting to materially different networks when compared to the transmission network. 

The final rule incorporates these facilities into the market in the most transparent way, with minimal impact on existing market participants and maintains the existing DWGM market design. 

The final rule amends the NGR across three main areas:

• market operations, which include registration categories, demand forecast, scheduling and bidding, application of constraints and capacity certificates
• market outcomes, which include title, custody and risk, allocations, participant compensation fund and default notices and market suspension
• system operations, which include connections, metering, gas quality, threats and interventions and maintenance planning.

The final rule also requires AEMO to update its procedures and systems no later than three months before the commencement date.

The Commission is satisfied that the final rule will, or is likely to, contribute to the achievement of the national gas objective by:

• promoting the existing efficiency of the market
• providing targeted and proportionate change that minimises implementation complexity
• promoting stability, transparency and clarity of roles and responsibilities
• being flexible and adaptable to technological innovation and a changing market and regulatory environment
• promoting safety, reliability and security of supply.

Interaction with Hydrogen review

This rule change process was conducted in parallel with the AEMC’s Review into extending the regulatory frameworks to hydrogen and renewable gases. 

The review was tasked with developing initial rules to extend the regulatory frameworks to low-level hydrogen-natural gas blends and renewable gases. 

On 8 September 2022, the AEMC published its recommended initial draft rules for the NGR and National Energy Retail Rules (NERR). The recommendations cover broad areas of the gas markets, including economic regulation, transparency and consumer protections. 

The review’s recommendations for transparency, ring-fencing, and associate contract provisions interact with the Commission’s final rule, which also includes transparency measures for non-standard gas specifications and reduces the risk of discriminatory curtailment from distributors.

Consultation process

On 21 October 2021, the AEMC published a consultation paper on the rule change request. We received 10 submissions, which can be found below.

The AEMC also held a stakeholder workshop on 14 December 2021 to discuss stakeholder views on facilitated gas markets, including the DWGM. The material presented can be found on the hydrogen review project page.

On 31 March 2022, the Commission published a draft determination, along with a more preferable draft rule. We received 10 submissions, available below.

The AEMC also held stakeholder workshops on 8 April 2022 and 29 July 2022 to discuss stakeholder views and key issues. The material presented at these workshops can be found below.

Extension

On 12 January 2022, the Commission extended the timeframe to make a draft determination to 31 March 2022 under section 317 of the NGL. This extension was made to allow the Commission sufficient time to analyse and consult on stakeholder submissions made to the consultation paper, reflecting the complexity of the issues involved.

On 30 June 2022, the Commission extended the date for making the final rule, under section 317 of the National Gas Law (NGL). This extension was made to allow the Commission more time to analyse the required changes from the draft rule, specifically, how best to incorporate blending facilities into the DWGM framework.

The additional time allowed the release of the final determination to coincide with the release of AEMC’s final report on the Review into extending the regulatory frameworks to hydrogen and renewable gases. Both work streams complement one another in that they provide the foundation for innovation that will allow this industry to develop further.

Background

On 8 September 2021, the AEMC received a rule change request from the Victorian Minister for Energy, Environment and Climate Change to amend Part 19 of the NGR, which covers the Victorian DWGM.

The request proposed to change Part 19 of the NGR in order to allow the market participation of distribution connected facilities, which may include, but are not limited to hydrogen, biomethane and other renewable gases.