On 19 March 2015, the AEMC published a final rule that will strengthen the governance arrangements and improve the implementation of the reliability standard and settings.

To do this, the final rule incorporates the reliability standard into the National Electricity Rules and requires the Reliability Panel to develop reliability standard and settings guidelines outlining the principles and assumptions it will make when conducting its four-yearly reliability reviews.

No material changes to the reliability standard have been made in this final rule. The existing form, level, and scope of the reliability standard remain unchanged. However, necessary amendments to the articulation of the reliability standard have been made both to provide clarity and to incorporate the reliability standard into the National Electricity Rules.

The final rule, which is the same as the draft rule, provides the Australian Energy Market Operator (AEMO) with more flexibility in the way in which it implements the reliability standard to enable more efficient reliability assessments.

The final rule also requires AEMO to develop reliability standard implementation guidelines, which will improve transparency of the methodology used to implement the reliability standard.

The commencement date of the final rule is 26 March 2015.

Background

On 25 September 2014, the AEMC commenced consultation on a rule change request received from the COAG Energy Council that sought to amend the governance arrangements for the reliability standard and settings. It also proposed changes to the way the reliability standard is implemented by the Australian Energy Market Operator (AEMO).

The COAG Energy Council considered that improvements could be made to the process for determining the reliability standard and settings to provide greater certainty and transparency for market participants. The proposed rule change is also intended to establish a clear allocation of responsibility for interpreting and applying the reliability standard.

To address these issues, the COAG Energy Council proposed amendments to the National Electricity Rules that would:

• require the AEMC to take on responsibility for setting the reliability standard, which is currently set by the Reliability Panel;
• shift the reliability standard and settings into a schedule to the rules and allow the AEMC to determine the reliability standard and settings through a process that is separate from the rule change process;
• require the AEMC to develop guidelines it must follow in reviewing and setting the reliability standard and settings;
• clarify that AEMO is responsible for making all reliability operational decisions and reviewing/amending processes to assess the adequacy of generation reserves to meet the reliability standard; and
• require AEMO to develop, consult on, and publish reliability standard implementation guidelines and reliability adequacy parameters, which will guide implementation of the reliability standard.

This rule change request arose primarily out of the findings and recommendations of the AEMC’s 2010 Review of the Effectiveness of National Electricity Market Security and Reliability Arrangements in light of Extreme Weather Events.