On 15 February 2021, Infigen Energy (Infigen) submitted a rule change request that proposed a change to the non-energy cost recovery formulas to enable the settlement and equitable recovery of non-energy costs during low operational demand.

The Infigen rule change request is one of two rule change requests aimed at amending the non-energy cost recovery formulas. The other request submitted by the Australian Energy Market Operator (AEMO) on 8 February 2021, sought to amend the rules to enable the continued settlement of non-energy costs in low net demand.

On 7 October 2021, the AEMC made a final rule that amends the National Electricity Rules (NER) to address market participants receiving payments for having a negative net regional demand. The final rule comes into effect on 1 September 2021.

The rule will minimise the risk that market customers pay a disproportionate amount of non-energy costs in low demand conditions. 

The rule removes ambiguity in the NER allowing AEMO to introduce a floor on individual market customers’ Adjusted gross energy (AGE) during a trading interval. Allowing AEMO to introduce this mechanism will remove the inequitable outcome that market customers will receive payments for having a net negative load during a trading interval. It also reduces the risk that market customers with positive net loads’ may be required to pay a disproportionate share of non-energy costs in low demand conditions

When combined with the final rule in the NEM settlement in low zero and negative demand conditions, this rule removes the risk to settlement that exists when demand is 0 MWh in a trading interval.

The final rule is a temporary solution designed to address the increasing risk of payments being made to market customers in low demand conditions. A long-term solution involving gross energy flows, is being considered in the Integrating energy storage solutions into the NEM rule change.

Differences to the draft determination

In the draft determination, the Commission chose to make no rule, on the basis that the rule that was made in the NEM settlement in low zero and negative demand conditions rule change, already reduced the inequitable and disproportionate payment risks, raised in Infigen’s rule change. 

However, since the release of the draft determination, the risk of payments being made to market customers has increased. The Commission has determined that this risk needs to be removed. 

Discussion paper

On 29 July 2021, AEMO provided a submission to the draft determination which provided new information on the implementation of Infigen’s proposed rule change. In light of this new information, on 5 August 2021, the AEMC released a discussion paper to seek stakeholder feedback on AEMO’s proposal. 

Submissions on the Discussion paper closed on 26 August 2021. 

On 12 August 2021, the AEMC extended the date of the final determination to 7 October 2021.

The Commission received five submissions to the discussion paper. 

AEMC’s draft determination

On 17 June 2021, the AEMC released its draft determination and its draft decision was not to make a rule. The Commission made this decision as the issues outlined by Infigen were addressed within the final determination and final rule made for the NEM settlement in low, zero and negative demand conditions urgent rule change, submitted by AEMO. The Commission adopted an expedited process for considering the AEMO request as it considered that the proposed rule was an urgent rule.

The final rule in the NEM settlement in low, zero and negative demand conditions rule change incorporated a solution that Infigen proposed in its rule change request as an alternative to what it proposed. As such, the Commission did not consider that an additional rule would contribute to the achievement of the national electricity objective.

Stakeholder submissions on the draft determination closed on 29 July 2021. 

In addition to AEMO’s submission the Commission received one other submissions to the draft determination, which was considered as part of the final determination. 

Consultation paper

On 22 April 2021, the AEMC initiated the rule change request with the release of a consultation paper.
The consultation paper sought stakeholder feedback on the following issues:

• the risks posed by low operational demand
• Infigen’s proposed solution
• implementation constraints around the proposed solution
• alternative solutions to the issue of low operational demand.

The Commission received five responses to this consultation paper.