On 3 June 2021 the Australian Energy Market Commission made a final determination and final rule to amend the National Electricity Rules (NER or Rules) to implement a holistic General Power System Risk Review (GPSRR) that will replace the existing Power System Frequency Risk Review (PSFRR). 

The new Rule will implement an annual review that will require the Australian Energy Market Operator (AEMO) in collaboration with Network Service Providers (NSPs) to identify and assess risks to power system security that it expects would be likely to lead to cascading outages or major supply disruptions.

This rule will increase the transparency of emerging system security risks that may need to be managed, helping AEMO, NSPs and other market participants better understand the nature of new risks and monitor these over time, all of which is particularly important given the transition underway.  

The final rule 

The Commission has determined to make a more preferable final rule that largely reflects the rule proposed by the COAG Energy Council. 

The final rule requires AEMO to review, in respect of a prioritised set of risks determined by AEMO:

• Non credible contingency events, the occurrence of which AEMO expects would be likely to involve uncontrolled increases or decreases in frequency, alone or in combination, leading to cascading outages, or major supply disruptions, and
• Other events and conditions (including contingency events) the occurrence of which AEMO expects, alone or in combination, would be likely to lead to cascading outages, or major supply disruptions.

The final rule requires AEMO to first identify a number of priority risks to be reviewed in the GPSRR and in cooperation with NSPs. The Commission expects that only a limited number of risks will be assessed in depth through each GPSRR. The GPSRR is a tool to monitor risks over time and is not intended as a present assessment of all potential system risks in detail. 

The final rule requires NSPs to cooperate with AEMO and provide all information reasonably requested by AEMO to allow them to undertake the review expeditiously. As part of the initial consultation, and for the purposes of the approach paper, NSPs would provide AEMO with their views and findings from their annual planning reviews in relation to potential risks that may lead to major supply disruptions. At this stage NSPs are not expected to perform system modelling exercises or provide computer models to AEMO. However, for the purposes of the assessment of the prioritised risks and in preparation of the final report, NSPs must provide AEMO with all information reasonably requested. This could include providing AEMO with details of any options the NSP has identified for mitigating the priority risks and providing any computer models that AEMO reasonably requires. 

Differences between the draft rule and the final rule

The key differences between the draft rule and the final rule centre around a limited number of changes made to address stakeholder concerns raised through submissions to the draft rule. These changes:

• Better manage the potential increase in resources required, ensuring resources are used efficiently and on priority matters;
• Ensure AEMO has all required data inputs to effectively assess priority risks, but maintains the GPSRR as a proportionate and manageable exercise;
• Better link the GPSRR to other planning processes.

Specifically, these changes are:

• The removal of specific risk areas to avoid ambiguity in the objective of the risk review and potential duplication of other activities.
• Increased flexibility in the scope to assess priority risks in order to manage the costs associated with the review.
• The final rule reflects the Commission’s expectation that NSPs, through their annual planning reviews, will consider the operation of, and interactions between, emergency control schemes and protection settings on an as needed and prioritised basis. 
• The Commission has decided to reflect in the final rule NSPs differing levels of involvement in the GPSRR process depending on the stage of the review in order to better manage the cost of the review.
• The Commission has extended the consultation period on the approach paper to 20 business days to enhance the consultation period and increase transparency.
• The Commission has extended the transition period and requires AEMO to complete the first GPSRR by 31 July 2023.

Background and rule change process

The COAG Energy Council submitted this rule change request in response to the recommendation made by the Commission in its Black System Event (BSE) review. As the rule change request was consistent with the recommendations made in the BSE review, and that recommendation was made following significant consultation as part of the Commission’s BSE review, the Commission determined that a fast track process was appropriate and initiated the rule change process with the publication of a notice on the 14 January 2021. 

On the 4 February 2021 the Commission published a draft determination and draft rule. The Commission’s draft determination was to make a more preferable rule largely consistent with the proposal by the COAG Energy Council. 

On 22 April 2021 the Commission extended the time to make a final rule. This extra time was necessary due to the complexity of issues involved in the detailed design of the GPSRR process and allowed for further consideration of issues raised by AEMO in response to the draft determination. The Commission has made its final determination and rule following consideration of issues raised in stakeholder submissions and the workshop held on 27 April 2021.