Australian electricity and gas markets - August 2022 update

What you need to do:

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

There have been a number of very significant developments and we have published detailed articles on them – the links to our articles are included in the information below.

National Energy Retail Rules

On 4 August 2022, the Australian Energy Market Commission (AEMC) published a draft determination and a more preferable draft determination in relation to the Establishing revenue determinations for Intending TNSPs rule change. on 4 August 2022 which clarifies the ability of the Australian Energy Regulator (AER) to establish a revenue determination for an Intending Transmission Network Service Provider. Under the draft rule, an Intending TNSP is defined as a registered participant who intends to provide prescribed transmission services. This includes:

• a person registering as an Intending Participant  intending to construct a new regulated transmission project; and
• an existing Market Network Service Provider.

Submissions to the draft rule are due by 15 September 2022.

On 4 August 2022, the AEMC initiated an expedited rule change process and published a consultation paper in response to the Amending the administered price cap rule change request. The rule change aims to increase the Administered Price Cap (APC) to a cost reflective level for today's fuel input costs to reduce the risk of a repeat of the circumstances that caused the recent market suspension. The Commission will publish a final determination and rule on 29 September 2022. 

On 4 August 2022, the AEMC released a final rule determination in relation to the  Improving of consultation procedures in the rules rule change. The final rule introduces two fit-for-purpose consultation processes that can be applied, depending on the most appropriate to the case, one for non-material changes and one for minor administrative changes.

On 18 August 2022, the AEMC released a final rule determination in relation to the Enhancing information on generator availability in MT PASA rule change. The rule requires scheduled generators to provide more detailed information about generator availability as the power system transitions. The final rule requires generators to submit a 'unit state' or reason code to explain their availability, alongside the megawatt availability they have already submitted to AEMO as part of the medium-term projected assessment of system adequacy (MT PASA) process.  The new requirements will commence on 9 October 2023.

National Energy Retail Rules

On 18 August 2022, the AEMC initiated an expedited rule change process and published a consultation paper  in relation to the Delaying implementation of the AER Billing guideline rule change requested by the Australian Energy Council. The rule change proposed a delay in implementation of the AER's Better Bills Guidelines from 31 March 2023 to 30 September 2023.

Stakeholder submissions on the consultation paper are due by 15 September 2022. AEMC is expected to publish a final determination and final rule by 13 October 2022. 

National Gas Rules

On 8 August 2022, the AEMC released a final rule determination in relation to the Improving of consultation procedures in the rules (Gas) rule change. The final rule removes the extended consultative procedure from the National Gas Rules (NGR) and introduces consultation according to the standard and flexible two-round process. 

On 8 August 2022, the AEMC received a rule change request to amend the NGR in relation to an interim change in LNG storage measures in the Victorian Declared Wholesale Gas Market. The AEMC will initiate a rule change process and publish a consultation process in early September.

Market updates

On 5 August 2022, the Federal Government announced six proposed areas in Australian Commonwealth waters for offshore renewable energy projects to be regulated under the Offshore Electricity Infrastructure Act 2001 (Cth) (OEI Act). Public consultation is currently underway for the first proposed area in the Bass Strait off the coast of Gippsland, with submissions due by 7 October 2022.

For more insight into this announcement, see our client alert here.

On 12 August 2022, Energy Ministers met to discuss the status of the energy market following recent volatility and agreed on a set of reforms to address current issues in the market. The key takeaways from the Ministerial communique to note are:

• the inclusion of an emissions objective in the National Energy Objectives;
• rejection of the Energy Security Board's (ESB) proposed design of the capacity mechanism;
• a package of gas market reforms was agreed; and
• the congestion management model was highlighted as important and the ESB's work on the proposed design was expedited.

For more insight into the impact of the communique see our client alert here.

On 18 August, AEMO published the total amount of additional compensation claims relating to the reliability interventions and suspension of the spot market in all regions of the NEM for the period from 12 to 23 June 2022. In total, approximately $114m in compensation claims were submitted before the 10 August deadlines. The submitted claims will be assessed by an independent expert over the coming months. Costs will then be allocated in accordance with the NEM Rules and recovered from Market Customers.

AEMO - 2022 ESOO

On 31 August 2022, AEMO published its 2022 Electricity Statement of Opportunities (ESOO) report, forecasting electricity reliability concerns that require an urgent response in most regions of the NEM in the next 10 years. The ESOO models the latest market data to identify combinations of circumstances when electricity supply will not be sufficient to meet demand, helping inform the planning and decision-making of market participants, investors and governments. 

Visit our Energy Transition hub for insights on navigating the drive towards decarbonisation and the universal focus on climate change.

Authors: Paul Newman, Partner; Cassandra Wee, Partner; Andre Dauwalder, Senior Associate: Harriet Curran, Lawyer; Rachel Sweeney, Trainee.