On 4 September 2020, the AEMC received a rule change request from the Hon Lily D’Ambrosio MP – Minister for Energy, Environment and Climate Change, Minister for Solar Homes, which sought to make procedural changes to the operation of the prudent discounts framework in Victoria, which is an adoptive jurisdiction.

In response, the AEMC has made a more preferable final rule under an expedited rule change process. 

Final rule determination

The final rule improves the consistency, clarity, transparency and administrative efficiency of the prudent discounts framework in Victoria as an adoptive jurisdiction. It also addresses concerns raised by both the rule change proponent and stakeholders.

Specifically, the final rule will make changes to the adoptive jurisdictional prudent discounts provisions within the National Electricity Rules (NER) so that:

• the Australian Energy Market Operator (AEMO) would no longer need to obtain the consent of a declared transmission service operator (DTSO) to agree to provide a prudent discount as the Victorian transmission network service provider.
• AEMO and the relevant DTSO would no longer be required to negotiate in good faith with each other when one asks the other to consider a particular prudent discount proposal.
• the relevant DTSO would need to provide any information that AEMO reasonably requires for the purpose of considering a prudent discount request.
• AEMO would need to apply to the Australian Energy Regulator (AER) for cost-recovery approval for a prudent discount that AEMO has agreed to provide, or has proposed to agree to provide, if AEMO seeks to recover more than 70% of the value of that discount from other customers.
• the new arrangements would commence on the date that the rule is made, though any pre-existing prudent discount requests would be subject to the previous framework.

The final rule commenced on 17 December 2020.

Rule change request

The rule change request sought to make procedural changes to the operation of the prudent discount framework in adoptive jurisdictions in the NER. 

An adoptive jurisdiction is one where the declared network functions of AEMO apply. At this time, Victoria is the only such adoptive jurisdiction.
 
The intent of the proposed changes was to clarify the procedural roles and responsibilities of both AEMO as the Victorian TNSP and the DTSOs, which own the assets forming the transmission network in Victoria. 

The proponent also sought to clarify and improve the procedural rights of Victorian transmission customers who wish to request a prudent discount.

The rule change request identified three key issues related to the current prudent discount framework in Victoria:

• The NER did not provide an obligation on the relevant DTSO to negotiate in good faith directly with a transmission customer who requests a discount, reducing the procedural rights of a transmission customer to obtain relevant information compared to in other jurisdictions.
• The NER did not provide an obligation on AEMO as the TNSP to provide reasons for refusing to agree to a discount or an obligation on the DTSO to provide reasons for refusing to consent to AEMO providing a discount.
• There was a lack of clarity as to whether AEMO can propose to agree to a discount on a conditional basis, pending the outcome of an application to the AER for approval of recovery of the entire discount amount from other transmission customers. 

On 8 October 2020, the AEMC initiated the rule change request under an expedited rule change process with the publication of a consultation paper.

On 5 November 2020, submissions closed to the consultation paper closed. Two submissions were received.

Expedited (non-controversial) rule change  

The Minister requested that the rule change request be treated as non-controversial and therefore proceed on an expedited basis.

The Commission considered that the proposed rule met the definition of a non-controversial rule, as it was unlikely to have a significant effect on the national electricity market. In addition, the rule change request was narrow in scope, and the proposed changes were largely of an administrative nature. The Commission therefore decided to use an expedited process to consider this rule change request. It did not receive any objections on using an expedited process.

Time Extension

On 26 November 2020, the Commission extended the time for making a final rule determination by two weeks until 17 December 2020.

This extension was considered necessary to allow for consultation on the more preferable rule and ensure that any complexities associated with this approach were appropriately addressed. 

While the Victorian Minister’s proposed changes were largely administrative in nature, concerns were raised by stakeholders regarding the outcomes of some of these proposed changes. As a result, the Commission determined that a more preferable rule would address the issues raised by both the Minister and stakeholders.