Legal development

Australian electricity and gas markets November update

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    What you need to do

    Stakeholders should note the new rules and reports published below, and note the deadlines for making submissions.

    National Electricity Rules

    On 17 November 2022, the Australian Energy Market Commission (AEMC) released its final determination and final rule regarding the Amending the administered price cap rule change to the National Electricity Rules (NER).  The AEMC has decided to raise the Administered Price Cap (APC) to a level that will reduce the risk of blackouts, secure the energy supply and keep the system more stable during the transition towards renewable energy.  The APC level has been raised following concerns that it was not high enough to manage the recent extreme market volatility, which led to the suspension of the National Electricity Market (NEM) in June 2022. The final rule increases the APC from $300/MWh to $600/MWh.  The rule will be implemented on 1 December 2022 and will remain effective until 30 June 2025.  No change to the cumulative price threshold (CPT) is made as a part of this final rule. 

    National Gas Rules and National Energy Retail Rules 

    On 24 November 2022, the AEMC published its final rules report in relation to the Review into extending the regulatory frameworks to hydrogen and renewable gases. The report recommends changes to the National Gas Rules (NGR) and National Energy Retail Rules (NERR) to extend the regulatory frameworks to include hydrogen blends and renewable gases. The recommended final rules:  

    • extend the economic regulatory framework to enable access to pipelines and support investment; 
    • improve the ring fencing framework to support competition;
    • enable informed and efficient decision making by extending market transparency mechanisms;
    • streamline operational arrangements for the Short Term Trading Market;
    • adapt the Victorian Declared Wholesale Gas Market (DWGM) to work in conjunction with the DWGM distribution connected facilities rule change; 
    • allow new services and commodities in the retail gas markets; 
    • enable consumers to be informed about changes in the type of gas supplied; and 
    • enable other covered gases by retaining the draft regulatory sandbox rules in their current form. 

    The AEMC has provided its recommended rules to the Energy Ministers for approval in accordance with the terms of reference. Once the required legislative changes are made, the rules will then be made by the South Australian Minister. 

    Market Reviews 

    On 3 November 2022, the AEMC published a draft report as a part of the Review of the regulatory framework for metering services. The report sets out 20 recommendations and options to accelerate the deployment of smart meters in the NEM.  The AEMC has highlighted several key recommendations, including: 

    • targeting a universal uptake of smart meters by 2030 in NEM jurisdictions under a legacy meter retirement plan; 
    • enhancing existing metering arrangements to reduce inefficiencies and poor customer experiences through recommended rule changes; 
    • supporting customers through the accelerated smart meter deployment with transitional measures; and 
    • unlocking new requirements to allow Distributed Network Service Providers, market participants and customers to  access power quality data. 

    Submissions on the draft report are being sought until 2 February 2023. Interested stakeholders can make submissions here

    Other updates

    On 2 November 2022, the Offshore Electricity Infrastructure Regulations 2022 (OEI Regulations) and Offshore Electricity Infrastructure (Regulatory Levies) Regulations 2022 (OEI Levies Regulations) commenced. The OEI Regulations are crucial to operationalising Australia's offshore wind regulatory regime and outline the detailed arrangements of the OEI framework under the Offshore Electricity Infrastructure Act 2021 (OEI Act) and Offshore Electricity Infrastructure (Regulatory Levies) Act 2021 (OEI Levies Act). We have reported on the OEI Acts in previous energy alerts (see here and here). Please see our latest energy alert for more specific information on What you need to know when applying for an offshore electricity infrastructure licence in Australia.

    On 3 November 2022: 

    • the Australian Energy Regulator (AER) published an issues paper and notice of consultation in relation to the development of the Reliability Compliance Procedures and Guidelines which support the Retailer Reliability Obligation (RRO) mechanism in the NEM. Submissions on the issues paper are being sought from stakeholders until 8 December 2022. More information can be found here; and 
    • the AER also published an issues paper on the 2023-24 Default Market Offer (DMO) price determination. The issues paper is the first step in the AER's annual process in setting the DMO prices. The DMO price is the maximum price that a standing offer customer in south-east Queensland, New  South Wales and South Australia can be charged by a retailer. The AER is considering changes to its pricing methodology and approach to setting the DMO 5 in light of market developments since DMO 4. The AER will release the draft 2023–24 DMO in early 2023 for consultation and publish the final DMO 5 in May 2023 for it to come into effect on 1 July 2023.

    On 4 November 2022, the AER released a draft guideline and explanatory statement following a review of the Ring fencing guideline (electricity transmission). The key proposals of the draft guideline are to: 

    • increase transparency into Transmission Network Service Providers' operations; 
    • reduce the harms associated with cross-subsidisation and discrimination; 
    • ensure that consumers are not paying for services that do not benefit them; and 
    • include additional reporting and compliance obligations.

    Submissions on the draft guideline are invited until 16 December 2022. For more information see here.  

    On 16 November 2022, the AER released the Wholesale Markets Quarterly – Q3 2022 Report. This report examines how the wholesale gas and electricity markets responded to what the AER described as "the most tumultuous months in the history of Australia's energy markets".

    On 18 November 2022, the AER released a draft report on Incentivising and measuring export service performance. The draft report follows the AEMC's final determination and rule change regarding Access, pricing and incentive arrangements for distributed energy resources. The rule change amended the NER and NERR  and tasked the AER with delivering a package of reform workstreams to strengthen customer protections and regulatory oversight over Distribution Network Service Provider's (DNSPs) provision of export services. The AER has invited stakeholder submissions on the draft report until 30 January 2023. For more information see here.

    On 30 November 2022, the AER published the Annual Retail Markets Report 2021-22 and Retail Energy Market Performance Update for Quarter 4 2021-22 which provides the retail energy market performance data that accompanies the report. The report covers the states and territories in which the Retail Law applies and reports on the market share, movements and performance overview of the retail energy market and energy businesses, as well as reporting on pricing and energy affordability and consumers' payment difficulties for the 2021-22 report period.

    Click here to see our latest Energy Alerts, as part of our Energy Alert Series.

    Authors: Paul Newman, Partner; Andre Dauwalder, Senior Associate; Alexia Cuss, Graduate and Murray Rissik.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.

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