Rule Change: Completed
On 10 September 2020, the Australian Energy Market Commission (AEMC) made a final determination and rule to replace the current hierarchy of intervention mechanisms with a principle that the Australian Energy Market Operator (AEMO) must use reasonable endeavours to select effective mechanisms that address the supply scarcity condition and minimise direct and indirect costs.
The Reliability and Emergency Reserve Trader (RERT), directions and instructions are mechanisms available to AEMO to address supply scarcity conditions in the NEM when they occur. The National Electricity Rules (NER) formerly prescribed that after dispatching all valid bids and offers, AEMO must use reasonable endeavours to first activate or dispatch the RERT and then, if necessary, issue either directions or instructions.
On 28 November 2019, AEMO submitted a rule change request to the AEMC proposing that the requirement for AEMO to exercise the RERT before issuing directions or instructions be removed from the Rules and replaced by a principle requiring AEMO to endeavour to minimise the costs and maximise the effectiveness of an intervention in the national electricity market (NEM). AEMO’s rule change request reflects the AEMC’s recommendation made in its Investigation into intervention mechanisms in the NEM review.
Final determination and rule
On 10 September 2020, the AEMC made a final determination to replace the existing hierarchy of interventions with a principle providing flexibility for AEMO to select the supply scarcity mechanism, or combination of mechanisms, that minimise direct and indirect costs and is effective at addressing the conditions of supply scarcity.
The final rule applies transparency and accountability requirements to cover the additional discretion provided to AEMO. The final rule requires AEMO to:
- develop, consult on, and publish procedures setting out its method and assumptions in selecting mechanisms to address supply scarcity conditions that minimise the direct and indirect costs borne by consumers.
- periodically review its procedures in consultation with stakeholders - reviews are required at least every four years with the first in 2023
- following intervention to report on the basis on which AEMO determined the mechanisms to be used.
The final determination includes transitional arrangements allowing the rule to come into effect prior to summer 2020-21.
Draft determination and rule
On 18 June 2020, the AEMC made a draft determination and rule to remove the current hierarchy for the use of intervention mechanisms, to improve AEMO's ability to manage the power system efficiently and flexibly.
The Commission received six submissions to its draft determination.
Fast track process
On 28 May 2020, the AEMC initiated the removal of intervention hierarchy rule change through a fast-tracked process. The rule change request was fast-tracked as stakeholder feedback on the issue addressed by the rule change was initially sought and received in 2019 as part of the AEMC’s Investigation into intervention mechanisms in the NEM. As such, the AEMC proceeded directly to a draft determination and draft rule.
Related rule changes
This final rule is part of a package of rule changes being progressed by the Commission as part of its interventions work program. The other rule changes that comprise this work program are: