The Australian Energy Market Commission (AEMC) has made a final rule to extend the application of the interim reliability measure (IRM) to the retailer reliability obligation (RRO) from 1 July 2025 to 30 June 2028.

Final Determination

The final determination extends the application of the interim reliability measure (IRM) to the retailer reliability obligation (RRO) until 30 June 2028.

As the power system transitions to a high variable renewable energy (VRE) energy-limited power system, reliability risk must be considered differently. This is particularly relevant for tail risk, which represents low-probability events that could have a high impact on reliability outcomes. The Reliability Panel is currently considering whether the form of the reliability standard needs to change to account for the changes in the system and tail risk.

The Commission considers the final rule to extend the application of the IRM to the RRO will best support the national electricity objective (NEO) and is in the long-term interests of consumers. The decision retains the IRM as a risk management tool as a supplementary measure to support reliability. This provides certainty to the market about the reliability framework until 2028, while the Reliability Panel conducts its review.

The Commission does acknowledge that if the IRM is triggered there may be some additional costs to industry, but considered the benefits to reliability as being more significant.

The AEMC used a fast-track process for this rule change, having considered the analysis and consultation done in the Review of the Interim Reliability Measure and the criteria for fast-tracking under the National Electricity Law (NEL).

Six submissions were received in response to the draft rule. These submissions and the views of stakeholders shared through the AEMC’s Review of the Interim Reliability Measure have been considered in making the final rule.

Next steps 

The final rule commenced on 21 September 2023.

Context

On 25 May 2023, the AEMC concluded its Review of the Interim Reliability Measure, as required under the National Electricity Rules (NER) and released a final report. The report recommended extending the application of the IRM to the ‘retailer reliability obligation’ (RRO) to 30 June 2028.

On 13 June 2023, AEMO made a request for a fast-track rule change to extend the IRM in line with the final report’s recommendation.

Background

In 2020, on the advice of the Energy Security Board (ESB), Energy Ministers introduced the IRM of 0.0006 per cent expected unserved energy (USE) as an interim measure to meet the community expectations that electricity supply remains reliable during a 1 in 10-year summer.

This tighter standard, which was due to expire on 30 June 2025, is a risk management tool for two measures designed to provide more certainty about reliability; the RRO and the Interim Reliability Reserve (IRR).

• The RRO encourages retailers to make contracts with generators to cover their energy demand.
• The Interim Reliability Reserve is out-of-market capacity reserve that can be called upon to deliver reliability.