Australian electricity and gas markets - March 2023 update

What you need to do:

Stakeholders should note the market updates below, and note any impacts on their compliance obligations.

National Electricity Rules

On 2 March 2023, the Australian Energy Market Commission (AEMC) published a consultation paper on the Australian Energy Council's (AEC)'s Efficient Provision of Inertia rule change request. Under the rule change request, the AEC proposes to introduce an inertia spot market to maintain power system security as synchronous coal and gas-fired generators retire.

The consultation paper is seeking stakeholder feedback on the key challenges of the existing system inertia framework, the AEC's spot market proposal, and alternative options to combat declining system inertia.

The AEMC expects further public consultation will be required, and has extended the timeframe for a draft determination until 29 February 2024. For more information see here.

On 2 March 2023, the AEMC published a consultation paper on the Australian Energy Market Operator's (AEMO) National Electricity Amendment (Implementing Integrated Energy Storage Systems) rule change request.

AEMO proposes to amend the Integrating Energy Storage into the National Electricity Market rule (IESS rule) made on 2 December 2021 to reduce implementation costs and improve clarity and certainty. The rule change request is being considered through an expedited rule change process. The three core amendments for consideration are:

• assessing the need for generating systems to be able to participate in aggregated dispatch conformance
• investigating the ability for semi-scheduled and bidirectional units to submit fast-start inflexibility profiles
• moving the start date for new non-energy cost recovery calculations to align with the commencement of the NEM billing week.

For more information, see here.

National Energy Retail Rules

No retail rule change requests were initiated in March. No AEMC determinations relevant to the National Energy Retail Rules were published. 

National Gas Rules

No gas rule change requests were initiated in March. No AEMC determinations relevant to the National Gas Rules were published.

Other updates

On 1 March 2023, the Australian Energy Regulator (AER) released its final amended Electricity Transmission Ring-fencing Guideline and explanatory statement. The amendments seek to ensure the guideline remains fit for purpose by:

• strengthening legal separation obligations to reduce potential harms from Transmission Network Service Providers (TNSP) cross-subsidising competitive services with regulated revenues;
• preventing potential discrimination against competitors by TNSPs; and
• including additional reporting and compliance obligations.

The revised guideline now applies to TNSPs from 1 March 2023.

On 3 March 2023, the AER published a draft decision and draft Reliability Compliance Procedures and Guidelines for consultation. The draft guidelines seek to assist the AER's Retailer Reliability Obligation (RRO) compliance assessments by imposing a new requirement for participants to provide certain information upon request from the AER.

The AER is inviting written submissions in response to the draft guidelines by 11 April 2023. 

On 9 March 2023, the AEMC initiated a review into the Interim Reliability Measure (IRM), releasing a draft report recommending an extension of the IRM from 30 June 2025 until 1 July 2028 on the basis that:

• the Reliability Panel is developing a new reliability standard, expected to commence on 1 July 2028;
• the IRM was introduced as an interim measure to address reliability, however, risks to reliability remain as the NEM transitions to a high variable energy power system; and
• Energy Ministers have already agreed to changes to the arrangements for the Interim Reliability Reserve and RRO. 

The AEMC invites submissions on the review and recommendations by 13 April 2023. For more information, see here.

On 10 March 2023, the AER published its final report and draft export service incentive scheme on its incentivising and measuring export services performance consultation. The scheme is intended to strengthen consumer protections and regulatory oversight of export services provided by distribution networks, and will:

• introduce reputational incentives via annual export service performance reporting;
• undertake a future review of incentive arrangements and the approach to incorporating export services into annual benchmarking reports by 2027; and
• introduce a new small-scale incentive scheme for export services, allowing distribution network service providers to consult with customers and propose bespoke export service incentive arrangements. 

The AER is inviting submissions on the draft export service incentive scheme until 28 April 2023.

On 15 March 2023:

• the AER released its draft determination of the Default Market Offer (DMO) for 2023-24. The DMO implements a price cap to protect consumers whilst allowing retailers to recover costs. The draft determination sets out the approach the AER intends to take to determine the final DMO price cap. The AER is inviting written submissions on the draft determination until 6 April 2023. For more information, see here.
• the AER published its quarterly retail performance report for October – December 2022. The report analyses key trends in the performance of the retail energy market and energy businesses, providing comparisons with the corresponding data from previous years. 

On 16 March 2023, AEMO published its 2023 Victorian Gas Planning Report. The report is intended to complement the 2023 Gas Statement of Opportunities (GSOO) and provide information on the supply demand balance in Victoria and the Victorian Declared Transmission System over the next five years. 

On 23 March 2023, the AEMC published a consultation paper and commenced a review of the operation of the Retailer Reliability Obligation.

The RRO supports reliability by obligating retailers to demonstrate that they have entered sufficient contracts for dispatchable capacity to cover demand in times identified as having potential shortfalls in supply. The review will consider the operational aspects of the RRO to ensure that it is operating as intended. It will not assess the overall efficiency or impact of the RRO.

The AEMC is inviting submissions in response to the consultation paper are invited until 4 May 2023. For more information, see here.

On 27 March 2023, AEMO released the 2023 Gas Statement of Opportunities. The report forecasts the adequacy of gas supplies to meet the changing gas needs of consumers from now until 2042 in Australian jurisdictions other than Western Australia.

On 28 March 2023, the AER released Issues Papers on seven revenue proposals for the 2024-29 regulatory period:

• Ausgrid;
• Essential Energy;
• Endeavour Energy (NSW);
• Evoenergy (ACT);
• Power and Water Corporation (NT); and
• TasNetworks.

The Issues Papers highlight key elements of each revenue proposal and identifies issues that will be the focus of AER's assessment and stakeholder engagement.

The AER is inviting submissions on the revenue proposals until 12 May 20223. For more information see here.

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Authors: Paul Newman, Partner; Andre Dauwalder, Counsel; Alexandria Brown, Graduate; and Murray Rissik, Paralegal.