On 22 July 2010, the AEMC in accordance with its statutory obligations and Rule making procedure, gave notice under sections 102 and 103 of the National Electricity Law of the making of the final Rule determination and Rule for the Publication of a Carbon Dioxide Equivalent (CO2-e) Intensity Index for the National Electricity Market (NEM) Rule change request.

The Rule as Made introduces a new obligation and framework in Chapter 3 of the Rules for AEMO to develop, review, amend and publish a CO2-e Intensity Index for the NEM. The information provided by a CO2-e Intensity Index is specifically sought by market participants to assist in determining and accounting for a carbon price, should one be present in the future, in the settlement of certain forward electricity contracts.

The Rule reflects the Rule proposed by AEMO however some amendments have been made which seek to provide guidance and clarify the matters that AEMO should consider and consult upon when developing detailed procedures to support the publication of a NEM CO2-e Intensity Index.

The Rule as Made is consistent with draft Rule. Only minor wording clarifications have been made.

Background

On 13 November 2009, the AEMC received a Rule change request from the Australian Energy Market Operator (AEMO). The Rule change request proposed a new Rule to require AEMO to calculate and publish a Carbon Dioxide Equivalent (CO2-e) Intensity Index for the National Electricity Market (NEM).

In summary, the proposed Rule required AEMO to:

• establish, maintain, update and publish a CO2-e Intensity Index for the NEM;
• develop, in consultation with stakeholders, procedures that would determine the methodology for calculating the Intensity Index: how suitable input data would be identified and the mechanism for estimating some inputs if necessary;
• publish the detailed procedures for the calculation and publication of the CO2-e Intensity Index, and also any other supplementary indicators;
• maintain and publish a list of all generating units that have been included in the CO2-e Intensity Index, the emission factors used in respect of each generation units; and
• place the timing obligations related to the CO2-e Intensity Index in the spot market operations timetable.

On 23 December 2009, the Commission gave notice under section 95 of the National Electricity Law to commence consultation on the Rule change proposal. The Commission determined to consider the proposed Rule under the Rule making process and not through the expedited process under section 96 of the NEL. A Consultation Paper prepared by staff of the AEMC was published to provide guidance to stakeholders in commenting on the Rule change proposal. The first round of consultation closed on 11 February 2010 and five submissions were received in total.

On 15 April 2010, the Commission published a section 107 of the NEL to extend the publication date of the draft Rule determination to 6 May 2010. The Commission considered an extension of time is necessary due to a material change of circumstances which affects this Rule Change Request.

On 8 April 2010, the AEMC gave notice under section 99 of the National Electricity Law of the making of the draft Rule determination and a draft Rule and inviting stakeholder submissions. The second round of consultation closed on 17 June 2010 and six submissions were received.

The draft Rule introduced a new obligation on AEMO to develop, maintain and publish a CO2-e Intensity Index for the NEM. The Commission made some amendments to the Draft Rule as proposed by AEMO. These sought to provide better guidance and clarify the matters AEMO should consider and consult upon when developing detailed procedures to support the publication of a NEM CO2-e Intensity Index.