As with the draft Rule, the Rule to be made accepts BP Energy Asia’s proposal to remove the requirement for Traders to be resident in, or have a permanent establishment in, Australia. It also includes some safeguards to manage the risks, particularly in relation to enforcing non-compliance with the auction participation agreement and the settlement residue distribution agreement, by requiring a Trader to have a local office and a local agent.

Background

On 4 July 2007, the Commission received a Rule change proposal from BP Energy Asia seeking the registration of foreign based persons and corporations as Trader class participants in the National Electricity Market (NEM). The Rule change proposed that persons seeking to register with NEMMCO as a Trader do not have to meet the requirement to be resident in, or have a permanent establishment in, Australia. It will enable such participants to participate in Settlement Residue Auctions.

BP Energy Asia had requested the proposal be treated as non-controversial as it was unlikely to have a significant effect on the NEM because Settlement Residue Auctions are not a core aspect of the NEM as a whole and increasing the number of potential participants in settlement residue auctions will not have any material effect on power system security or administration of the wholesale energy exchange.

On 19 July 2007, the Commission published a notice under section 95 of the NEL commencing initial consultation on the Rule change proposal for the registration of foreign based persons and corporations as Trader class participants in the NEM.

The Commission considered that the regular Rule change process will ensure that a comprehensive assessment of the proposal’s impact on the market is undertaken. For this reason, the Commission had not accepted BP Energy Asia’s request to expedite the making of the Rule.

The Commission invited interested parties to provide submissions on the Rule change proposal by 20 August 2007.

On 11 October 2007, the Commission published a notice under section 107 of the NEL extending the period of time for publishing its draft Rule determination on the Registration of foreign based persons and corporations as Trader class participants Rule by a further three weeks to 1 November 2007.

The Commission made this decision as it considered it is in the public interest for the Commission to sufficiently consider the complex issues raised in NEMMCO's submission and BP Energy Asia's response to these issues in its supplementary submission, dated 12 September 2007, prior to publishing the draft Rule determination.

On 18 October 2007, the Commission published a notice under section 99 of the NEL making the draft Rule determination and draft National Electricity Amendment (Registration of foreign based persons and corporations as Trader class participants) Rule 2007.

The draft Rule accepted BP Energy Asia’s proposal to remove the requirement for Traders to be resident in, or have a permanent establishment in, Australia. The draft Rule also included some safeguards to manage the risks, particularly in relation to enforcing non-compliance with the auction participation agreement and the settlement residue distribution agreement, by requiring a Trader to have a local office and a local agent. A marked up version of the Rules incorporating the draft Rule was also published.

The reasons for making the draft Rule are outlined in the draft Rule determination.

The Commission invited interested parties to make submissions in response to the draft Rule determination and draft Rule by 30 November 2007.

On 20 December 2007, the Commission published a notice under sections 102 and 103 of the NEL advising of the making of the National Electricity Amendment (Registration of foreign based persons and corporations as Trader class participants) Rule 2007 No.10 and the corresponding final Rule determination.

As with the draft Rule, the Rule to be made accepts BP Energy Asia’s proposal to remove the requirement for Traders to be resident in, or have a permanent establishment in, Australia. It also includes some safeguards to manage the risks, particularly in relation to enforcing non-compliance with the auction participation agreement and the settlement residue distribution agreement, by requiring a Trader to have a local office and a local agent.

The Commission did not make substantive changes from the draft Rule to the Rule to be made. The Commission made some minor enhancements to the Rule to be made to improve the consistency of wording of the Rule with the Rules generally, and to reduce redundancy in the operation of the clause. The Commission also included a requirement on NEMMCO to amend the Auction Rules to incorporate the Rule as made by 1 September 2008. NEMMCO will have to amend the Auction Rules in accordance with the requirements in the Rules, which should have the effect of allowing foreign based Traders to participate in NEMMCO’s September settlement residue auctions.

The reasons for making the final Rule are outlined in the final Rule determination. The Rule commenced on 1 January 2008.