On 30 June 2011, the AEMC published the final Rule determination and Rule for the Scale Efficient Network Extensions (SENEs) Rule change request.

The Commission's final determination is to make a Rule which is largely reflective of, and consistent with, the draft Rule determination and draft Rule, with some minor clarifications.  The Rule as Made is a more preferable Rule which differs from the proposed Rule as well as the options presented in the AEMC's Options Paper. 

The key advantage of the Rule as Made is that it does not compel anyone, including consumers, to bear the risk and cost of stranded assets. Rather, it provides a mechanism under which opportunities to capture scale efficiencies can be made transparent.

The Rule as Made requires transmission businesses to undertake and publish, on request, specific locational studies to reveal to the market potential opportunities for efficiency gains from the coordinated connection of expected new generators in a particular area.

The study would help potential investors make informed, commercial decisions to fund a SENE, having weighed the potential gains from coordinated, efficient generator connection arrangements against the potential costs of assets not being fully used.

Decisions to fund, construct, operate and connect to a SENE would then be made by market participants and investors within the existing framework for connections in the Rules.

The reasons for the Commission's decision are set out in detail in the final Rule determination.

The Rule as Made will commence on 1 July 2011.

Background

On 15 February 2010, the Ministerial Council on Energy (MCE) submitted a Rule change request to the Commission relating to the introduction of a new framework for the efficient connection of clusters of new generation. The purpose of the proposed Scale Efficient Network Extensions (SENEs) is to allow the connection of multiple generators to the shared network over a period of time so as to prevent the inefficient duplication of connection assets that might otherwise occur. The proposed Rule change sets out a framework for the planning, charging and revenue recovery for SENEs and adjustments to the process for connections.

This Rule change request stems from the Commission's previous Review of Energy Market Frameworks in light of Climate Change Policies. The Final Report for that Review made a number of recommendations that seek to strengthen energy market frameworks to ensure they will be resilient to the changes that are expected to occur as Australia transitions to a lower carbon economy. There will be increasing pressure on network service providers to build efficiently sized connections to accommodate the anticipated new clusters of generation, particularly renewable generation, that is anticipated as electricity generation turns from coal towards lower carbon fuels such as gas, wind and solar.

On 1 April 2010, the Commission gave notice under section 95 of the NEL to commence consultation on the Rule change proposal from the MCE. 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 13 May 2010. In total, 30 submissions and supplementary submissions were received.

On 1 July 2010, the Commission published a notice under section 107 of the NEL to extend the publication date of the draft Rule determination to 30 September 2010 and the publication date of the final Rule determination to 3 February 2011.

On 16 August 2010, the Commission announced that it would publish an Options Paper before proceeding to a draft Rule determination. The Commission decided that an additional step in the consultation process was necessary in this instance due to the complex nature of the proposed Rule, the divergent views expressed across the industry and the emergence of possible alternative solutions. The purpose of the Options Paper was to test these potential solutions with stakeholders to assist the Commission in determining which will best address the identified gaps in the existing framework, consistent with the national electricity objective.

Accordingly , on 19 August 2010, the Commission published a notice under section 107 of the NEL to extend the publication date of the draft Rule determination to 17 February 2011 and the publication date of the final Rule determination to 12 May 2011.

On 20 October 2010, the AEMC held a Public Forum in Adelaide for the Scale Efficient Network Extensions Rule change request. The Forum provided an opportunity to discuss the issues and options presented in the Options Paper.

The Options Paper consultation closed on 12 November 2010.  In total, 22 submissions and supplementary submissions were received.

On 3 February 2011, the Commission published a notice under section 107 of the NEL to extend the publication date of the draft Rule determination to 10 March 2011 and the publication date of the final Rule determination to 30 June 2011.  The Commission considered that the proposed Rule raises issues of sufficient complexity and difficulty such that an extension of time is necessary.

On 10 March 2011, the Commission gave notice under section 99 of the NEL of the publication of the draft Rule determination, including a draft Rule, for the SENEs Rule change.

The Commission determined to make a draft Rule that differs from the proposed Rule and the five options presented in the AEMC's Options Paper.  The reasons for the Commission's decision are set out in detail in its draft Rule determination.

Section 108A of the NEL

On 2 June 2011, the AEMC published a short report setting out the reasons why the SENEs Rule change request has not been finalised within 12 months of formal commencement of the Rule change process.

The Commission is required to publish such a report under section 108A of the NEL.

The final determination has not been made within 12 months of the publication of the section 95 notice as a result of:

• the complex nature of the proposed Rule change;
• the divergent views expressed across the industry and within industry sectors; and
• the emergence of possible alternative solutions.

To ensure the Commission's assessment of the Rule change request is robust, credible and will promote an outcome which is consistent with, and will contribute to, the achievement of the NEO, the Commission made the decision to extend the periods of time for considering the Rule change request, including undertaking an additional consultation step.