On 22 March 2012, the Commission made a final rule and determination that enables the market operator, AEMO, to the change the payment arrangements for negative intra-regional settlements residue.

The rule enables AEMO to better manage the risk of short payments from Transmission Network Service Providers (TNSPs) and, hence, reduce the risk of short payments to market participants. In addition, the rule ensures one consistent payment procedure applies to all TNSPs, for both types of settlements residue. This should help to simplify the settlements process and may result in lower administrative costs for AEMO and TNSPs.

The rule change process was initiated on 2 February 2012 with the release of a public notice, a copy of the rule change proposal from AEMO and a consultation paper prepared by staff of the AEMC.

The AEMC asked stakeholders whether they objected to the rule change being assessed under the expedited process for 'non-controversial rules'. The end date for objections to the expedited process was 12 February 2012 and no objections were received. Submissions on the rule change closed on 1 March 2012 and two submissions were received.

On 15 March 2012, the AEMC gave notice under section 107 of the National Electricity Law that it had extended the period of time for making the final determination to 22 March 2012. The AEMC considered an extension of one week was necessary to allow additional time to work through issues of complexity with stakeholders that were raised during consultation.

The final rule and determination were made on 22 March 2012, with the rule commencing operation on 5 April 2012. The final rule largely adopts the rule proposed by AEMO, except that it contains a number of minor clarifications and transitional arrangements. The transitional arrangements apply from the commencement date until such time as a new payment procedure has been implemented by AEMO.

The final determination is available on this webpage. It contains further information on the rule change request, the Commission’s assessment of the request, stakeholder feedback obtained during consultation and the rationale for the rule as made.

Any enquiries in relation to this project should be addressed to Rory Campbell or Skye d'Almeida on (02) 8296 7800.

Background

Under certain market conditions, AEMO receives payments from TNSPs as part of the spot market settlements process. In October 2011, AEMO proposed a rule change to alter the timing of one of these payment types - the payment of negative intra-regional settlements residue.

A settlements residue occurs due to the method used in the national electricity market (NEM) to account for the energy losses when electricity is transferred from generators to consumers. There are two types of settlements residue that occur in the NEM - intra-regional and inter-regional. These can be either positive or negative. The AEMO rule change request dealt solely with the payment of residues that are negative and intra-regional.

When this type of residue occurs, TNSPs are required to pay AEMO in order for AEMO to pay the market the full amount owing for a billing period in a particular region. If TNSPs do not pay the correct amount on time, AEMO must make short payments to the market for that period. AEMO requested the rule change to reduce the risk of this occurring and to align the payments of these residues with the other type of settlements residue - negative inter-regional settlements residue.

The rule change related to the timing of payments by TNSPs. It did not change the way the payment amount was calculated, nor who was responsible for the payment.