On 12 March 2020, the AEMC has made a final rule that simplifies risk management for market participants and improves wholesale gas prices in the Victorian Declared Wholesale Gas Market (DWGM). 

The final rule requires AEMO to take physical constraints on withdrawals into account when setting pricing schedules. This will result in pricing schedules that better align with the physical capability of the system and reduce uncertainty and scheduling risk for market participants. 

The final rule also removes the link between authorised maximum daily quantity (AMDQ) or capacity certificates and uplift payments, such that a congestion uplift category is no longer required.  This will simplify risk management, which may encourage interregional trade and competition, and reduce regulatory and administration burden for AEMO and market participants.

The final rule retains the current principle that uplift payments are to be allocated so far as practicable to market participants that caused the need for ancillary payments, however, it removes rules that require AEMO to take into account the extent to which a market participant's use of gas is in excess of a baseline derived from AMDQ or capacity certificates. The Commission considers that such a baseline-based congestion uplift mechanism does not appropriately allocate 'cost to cause' and would involve unwarranted complexity and cost. The principle of allocating cost to cause so far as practicable can be achieved through the other categories of uplift set out in AEMO's uplift payment procedures. 

In deciding to make this final rule, the Commission has taken into account interactions with the final rule for the separate rule change on DWGM improvement to AMDQ regime, also published on 12 March 2020. 

Consultation process

On 14 March 2019 the Commission published a consultation paper on the rule change request. Eleven submissions were received. 

On 13 June 2019 the Commission extended the period of time to make the draft determination to 5 September 2019 due to the complexity of the issues raised in the rule change request. 

Stakeholder responses to the draft determination were due by 24 October 2019. Eleven submissions were received, which included one late submission.

On 14 November 2019 the Commission extended the period of time to make the final determination to 12 March 2020. The Commission considers that this extension is necessary due to the complexity of the issues raised in the rule change request and stakeholder submissions.

Background

On 5 November 2018, the AEMC received a rule change request from the Victorian Minister for Energy, Environment and Climate Change that sought to amend the NGR by spreading the recovery of congestion uplift costs across market participants, instead of the current approach that aims to recover congestion uplift payments from those parties that caused the congestion. 

On 24 November 2016, the AEMC received a rule change request from the Australian Energy Market Operator (AEMO), on behalf of EnergyAustralia. The rule change request sought to amend the NGR to allow AEMO to include physical constraints that limit scheduled withdrawals in the determination of the pricing schedule for the Victorian DWGM. 

As these two rule change requests both seek to improve risk management for market participants in the DWGM the Commission has consolidated them. The consolidated rule change request is referred to as the DWGM simpler wholesale price.

On 5 November 2018, the AEMC also received two other related rule change requests from the Victorian Minister, seeking to amend the NGR:

• The DWGM forward trading market rule change request proposed establishing a forward trading exchange. On 4 July 2019 the Commission published a draft determination decision to not make this rule.
• The DWGM improvement to AMDQ regime rule change request proposed introducing separate tradeable entry and exit certificates, enabling a secondary trading platform to be introduced and making certificates available for a range of different tenures. On 5 September 2019 the Commission published a draft determination to make a more preferable rule.

The Commission addressed these two other requests through separate rule change processes, but has considered potential interactions between all three rule change requests.

Correction of data in background paper

On 14 March 2019 the AEMC published a background paper on the DWGM in relation to the three rule change requests that were being considered by the AEMC.

On 5 September 2019, the AEMC corrected data on uplift payments that was published in the background paper. The changes are detailed in an information sheet.