Australian electricity and gas markets - February 2023 update
07 March 2023
What you need to do
Stakeholders should note the market updates below, and note any impacts on their compliance obligations.
National Electricity Rules
No electricity rule change requests were initiated in February. No Australian Energy Market Commission (AEMC) determinations relevant to the National Electricity Rules were published.
National Energy Retail Rules
No retail rule change requests were initiated in February. No AEMC determinations relevant to the National Energy Retail Rules were published.
National Gas Rules
No gas rule change requests were initiated in February. No AEMC determinations relevant to the National Gas Rules were published.
Other updates
On 2 February, the AEMC's Reliability Panel initiated its Annual Market Performance Review of the National Electricity Market (NEM) for 2022. The review will provide observations and commentary on the performance, reliability, security and safety of the national power system over the period of 1 July 2021 to 30 June 2022, which includes the June 2022 market suspension event. An explanatory statement and final report are expected to be published on 30 March 2023.
On 17 February:
- the Security of Critical Infrastructure (Critical infrastructure risk management program) Rules (LIN 23/006) 2023 (CIRMP Rules) came into force. Responsible entities for certain critical infrastructure assets, such as critical electricity assets, must now develop, maintain, comply with and report on a written critical infrastructure risk management program (CIRMP). This includes complying with additional cyber security requirements, such as the documents and standards set out in section 8(4) of the CIRMP Rules. Assets that were critical infrastructure assets on 17 February 2023, have 6 months to establish and begin complying with their CIRMP obligations under Part 2A of the SOCI Act. Whereas an asset that becomes a critical infrastructure asset after 17 February 2023, will have 6 months from that date until Part 2A will apply to it; and
- the AER also released a Gas transparency measures (reporting) compliance bulletin which provides a summary of the reporting obligations for entities engaged in gas market activities under the National Gas Rules (NGR) and the National Gas Amendment (Market Transparency) Rule 2022. Gas Bulletin Board reporting obligations commence on 15 March 2023 so all gas market participants must ensure they are aware of their reporting obligations under the NGR.
On 22 February, the Energy Ministers released an Information paper on extending the Australian Energy Market Operator (AEMO)’s functions and powers to manage east coast gas system reliability and supply adequacy. On 12 August 2022, the Energy Ministers agreed to take a range of actions to support a more secure, resilient and flexible east coast gas market, including the implementation of a reliability and supply adequacy framework that can be used to identify and respond to reliability and/or supply adequacy threats and better manage periods of volatility. Following this 12 August decision, the Energy Ministers agreed in October 2022 to amendments to the National Gas Law that were required to give effect to the new framework, and to amendments to the National Gas Regulations and National Gas Rules in February 2023 that are required to underpin that framework.
On 23 February, the AEMC published the Schedule of reliability settings for 2023-24. The AEMC is required under the National Electricity Rules to adjust the market price cap and cumulative price threshold for the NEM, in line with the consumer price index, by 28 February each year. The market price cap is the maximum price that can be reached on the spot market during any dispatch and trading interval, and the cumulative price threshold is the maximum price across seven days' worth of trade. The values for the market price cap and cumulative price threshold for the 2023-24 financial year (as compared with the 2022-23 financial year) are as follows:
| 2022-23 | 2023-24 | |
|---|---|---|
| Market price cap | $15,500 / MWh | $16,600 / MWh |
| Cumulative price threshold | $1,398,100 | $1,490,200 |
On 24 February:
- the AER published two guidance notes to assist NSW Coal Mines and NSW Power Stations with understanding their compliance obligations with the Coal Market Price Emergency Directions made by the NSW Minster for Energy under the Energy and Utilities Administration Act 1987 (NSW);
- the AER released the first Contribution determination for cost recovery under the NSW Electricity Infrastructure Roadmap in the NSW Gazette. The AER is required to make annual contribution determinations by 28 February each year to set out the costs of implementing the NSW Electricity Infrastructure Investment Act 2020 (NSW) over the coming financial year. The total contribution determination amount for the 2023−24 financial year is $138.14 million, with each NSW distribution network service provider being allocated to pay a portion of that amount as set out in the gazette notice;
- the AER also released a new Rate of Return Instrument 2022 and accompanying Explanatory Statement. The rate of return is part of the revenue that networks recover from customers. The AER sets the rate of return to cover the cost an efficient network would incur to raise its capital in the financial markets. This instrument referred to as the "2022 Instrument" is largely consistent with the "2018 Instrument" but has been updated to reflect the latest data and market conditions. The 2022 Instrument will bind all regulatory determinations for the next 4 years until it is next revised; and
- finally, the Energy and Climate Change Ministerial Council (ECMC) released its Meeting Communique following the ECMC's first meeting. The communique states that the Ministers agreed to a way forward on the complex issue of transmission access reform. The Ministers specifically
- agreed to implement ‘enhanced information’ reforms to provide east coast market participants with better information on the optimal location for new generation and storage. The Ministers requested that the Energy Security Board (ESB) engage with energy senior officials and stakeholders to develop the voluntary Congestion Relief Market (CRM) and priority access model, and to bring forward a detailed design for consideration by the ECMC in mid-2023; and
- decided not to further develop or consider the congestion management model and congestion fee options, ruling out any models using locational marginal pricing.
If approved later this year, the ECMC state that the CRM and priority access model reforms are estimated to yield net benefits for industry and consumers of up to $5 billion (NPV) and lower emissions by 23 million tonnes by 2050.
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Authors: Paul Newman, Partner; Andre Dauwalder, Counsel; Alexia Cuss, Trainee; and Alexandria Brown, Trainee.
