The rule provides that the offers of scheduled network service providers (SNSPs) must be no less than the market floor price as defined in the National Electricity Rules (NER).

The Commission considers that the rule is likely to contribute to the National Electricity Objective because:

• Prescribing a price floor in the NER provides certainty to market participants with respect to the behaviour of SNSPs and the process for changing this parameter.
• Given the current role of SNSPs in the National Electricity Market, the Commission considers that the market floor price definition in the NER, which applies to generation and scheduled load, should also apply to SNSP offers. This ensures that, to the extent possible, the NER does not advantage one technology type above another.  

The Commission’s final determination

On 19 December 2013, the AEMC made a final rule determination in relation to a rule change request regarding negative offers from scheduled network service providers (SNSPs). The Commission has made a more preferable rule that sets a lower limit for SNSP offers at the market floor price.

This final rule determination will not prevent Hydro Tasmania, together with a negative Basslink offer, from making an effective offer below the market floor price into Victoria when constraints between the Latrobe Valley and the Victorian regional reference node bind.

In making this final rule determination the Commission has considered the following:

• There is currently no lower price limit on SNSP offers in the National Electricity Rules (NER). The Commission considers that key market parameters, such as the price floor and price cap, should be contained in the rules and subject to the AEMC statutory rule change process. This provides certainty to market participants and promotes efficiency in decision making.
• Given the current role of SNSPs in the National Electricity Market (NEM), which is to actively trade and compete with generators and scheduled load, the existing market floor price definition in the NER should apply to SNSPs. This is consistent with the principle of competitive neutrality, whereby different technologies in the NEM are treated on the same basis.

The Commission notes that if the future role of SNSPs changes in response to a broader review, a different price cap and/or floor may need to be considered.

Background

 A rule change was proposed by International Power-GDF Suez (now GDF Suez Australian Energy) and Loy Yang Marketing Management Company (now AGL Loy Yang Marketing) to set a floor price of zero for the offers of SNSPs.

The proponents were concerned that negative offers from SNSPs can cause some generators in the NEM to have an effective offer that is below the market floor price, undercutting other generators.

The proponents considered that this led to inefficient outcomes and proposed a rule that sought to restrict SNSPs from making negative price offers.

SNSPs were currently only subject to a price cap. The proponents considered that this was an error and that, even if their proposed rule was not made, a price floor should be introduced.

Consultation process

On 29 March 2012, the AEMC commenced consultation on the rule change request and published a consultation paper to facilitate public comment. The period for submissions closed on 3 May 2012. We received 10 submissions.

On 26 September 2013, the AEMC published a draft determination. The period for submissions closed on 7 November 2013. We received six submissions.