On 6 December 2018 the Commission made a final rule that requires a move to a global settlement framework for the demand side of the wholesale electricity market. The change to global settlement will treat all retailers equally by allocating a share of ‘"unaccounted for energy" to all retailers in a distribution area. It will also enable the Australian Energy Market Operator (AEMO) to fully reconcile the market. The global settlements framework fully commences on 6 February 2022.

Final determination

The final rule moves settlements of the demand side of the wholesale electricity market from the current 'settlements by difference' framework to a 'global settlements' framework. The final  rule:

• improves transparency and accuracy of settlements, placing a reporting requirement on AEMO to analyse and make recommendations on how to reduce unaccounted for energy.
• incentivises retailers to minimise unaccounted for energy, such as electricity theft
• creates a more equal platform for competition in the retail electricity market by allocating unaccounted for energy to all retailers within each local area based on their customers’ consumption within the area.

The soft start for global settlements and the full commencement of five minute settlement both begin on 1 July 2021. This aligns the development of systems and procedures for both changes. Global settlements will fully commence on 6 February 2022. 

The final rule, which is a more preferable rule, is in response to a rule change request submitted by AEMO. The final rule is generally consistent with AEMO’s rule change request but varies in some specific design elements of global settlements. 

Background

On 16 March 2018 the AEMC received a rule change request from AEMO to apply a 'global settlement' framework to the demand side of the wholesale electricity market. 

The current settlement framework for the demand side of the national electricity market is known as ‘settlement by difference’. This approach means that the ‘local retailer’ for a distribution area bears the risk for all ‘unaccounted for energy’ (UFE) in its area. UFE includes unaccounted for technical losses, estimation errors and commercial losses. Of these contributors to UFE, local retailers are only able to manage their own commercial losses.   

AEMO proposed that the IT system capability for global settlement should be developed in alignment with the design and build activities already underway for the introduction of five minute settlement in
2021.

On 10 May 2018 the AEMC published a consultation paper on the rule change request. On 30 August 2018 the AEMC published a draft determination and draft rule for consultation.  Stakeholder submissions to both rounds of consultation can be found below.

Note: Schedules 1 to 4 of the National Electricity Amendment (Global settlement and market reconciliation) Rule 2018 No. 14 will commence operation on 1 May 2022 as a result of the amendments made under the National Electricity Amendment (Delayed implementation of five minute and global settlement).