In making this final Rule determination, the Commission has largely adopted NEMMCO’s proposal, with some minor modifications to enhance and clarify the operation of reallocations in the NEM.

Background

On 4 April 2006 the National Electricity Market Management Company (NEMMCO) submitted to the Commission a request to make a Rule change relating to the National Electricity Market (NEM) settlements reallocation process.

The proposed Rule change was intended to enhance the current NEM settlements process and included:

• permitting more flexibility in the type of reallocation transactions by allowing the detail of reallocation calculations to be included in a set of procedures rather than directly embedded in the Rules;
• introducing a new category of Registered Participant called a Reallocator; and
• introducing the concept of a prudential margin.

The Commission considered the proposal under section 94 of the NEL and published a notice under section 95 of the NEL commencing first round consultation on this Rule proposal on 29 June 2006. Submissions closed on 11 August 2006.

On 21 September 2006, given the technical and complex nature of the proposal, the submissions received, and the possible impacts on the financial settlements market, the Commission published a notice under section 107 of the NEL extending the publication of the draft Rule determination and draft Rule to 30 November 2006.

On 23 November 2006, the Commission gave notice under section 99 of the NEL of the making of the draft Rule determination for this proposal. The draft Rule determination largely adopts the substance of NEMMCO’s proposal, but has made some amendments to the proposed Rule to enhance and clarify the operation of reallocations in the NEM. These include:

• clarifying how a Reallocator is treated in the NEM;
• the timing and establishment of new reallocations procedures; and
• providing transitional arrangements recognising existing reallocations and any reallocations registered while the new reallocation procedures are being developed.

The reasons for proposing to make the Rule are outlined in the draft Rule determination.

Following three requests for a pre-determination hearing, on 7 December 2006 the Commission gave notice under section 101 of the NEL that a hearing will be held at 9:30am on Friday 15 December 2006 in the AEMC Boardroom at Level 16, 1 Margaret Street, Sydney. Persons were required to register to attend the hearing. One presentation was given at the hearing.

On 15 February 2007, the Commission gave notice under section 102 of the National Electricity Law of its final Rule determination, which includes the Rule to be made, the National Electricity Amendment (Reallocations) Rule 2007.

In making this final Rule determination, the Commission has largely adopted NEMMCO’s proposal, with some minor modifications to enhance and clarify the operation of reallocations in the NEM. The key elements of the Rule to be made are:

• providing for a new category of registered participant - a Reallocator;
• improving flexibility in reallocation procedures; and
• changes to prudential requirements.

The final Rule determination sets out the reasons for the Commission’s decision.

On 20 February 2007, at the request of NEMMCO, the Commission decided to delay the commencement of the National Electricity Amendment (Reallocations) Rule 2007 from 22 February 2007 to 31 May 2007, and made an amendment to the final Rule determination published on 15 February 2007. The Commission also amended the commencement date in the Rule to be made, and gave notice under s.103 of the National Electricity Law of the making of the National Electricity Amendment (Reallocations) Rule 2007 No.1.