Australian electricity and gas markets - July 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 Electricity Rules

The Australian Energy Market Commission (AEMC) published an options paper for the contestability workstream of the Transmission planning and investment review (Review)  on 7 July 2022.  As part of the Review, the AEMC is considering whether the regulatory framework is flexible enough to enable the timely and efficient delivery of major transmission projects needed to support the transformation of the energy market towards net zero.  The options paper sets out several matters relevant to the AEMC's analysis and consideration as to whether increased contestability in the delivery of major transmission projects is likely to deliver benefits to consumers, compared to the provision by monopoly network service providers under the existing regulatory framework.  The AEMC is seeking stakeholder feedback on:

• four contestability strawperson options;
• its proposed assessment framework for the contestability workstream; and
• some of the key considerations for thinking about how to identify projects suitable to contestable delivery.

Stakeholder submissions on the options paper are due by 18 August 2022.

The AEMC published a draft rule determination and a draft rule on 7 July 2022 in relation to the Material change in network infrastructure project costs rule change.  The AEMC's draft rule aims to provide clarity on the process for determining whether there has been a material change in the circumstances for the Regulatory Investment test (RIT).  The draft rule proposes that all RIT proponents would be required to consider whether there has been a material change in circumstances and, where the proponents consider this to have occurred, to inform the Australian Energy Regulator (AER) and propose a course of action.  The draft rule also seeks to improve cost estimate accuracy by clarifying the rules governing the guidelines for RITs in order to support strengthened guidelines for cost estimate development.  Stakeholder submissions on the draft determination are due by 1 September 2022.

The AEMC extended the date it will publish its final determination for the Primary frequency response incentive arrangements rule change to 8 September 2022. As part of this rule change, the AEMC is examining new incentive arrangements to encourage generation and load to help control power system frequency. 

The AEMC published a directions paper on 21 July 2022 that seeks further feedback on the Recovering the cost of AEMO's participant fees rule change which is considering the recovery of the Australian Energy Market Operator's (AEMO) participant fees by transmission network service providers (TNSPs).  The rule request seeks to establish an efficient administrative process for TNSPs to recover the cost of AEMO's participant fees that have been newly allocated to them.  Stakeholder submissions on the direction paper are due by 18 August 2022. 

The AEMC has given advance notice of its intention to initiate and expedite the Amending the administered price cap rule change request requested by Alinta Energy.  As part of the rule change request, Alinta Energy proposes that the Administered Price Cap (APC) is increased from $300/MWh to $600/MWh in every NEM region. The AEMC intends to release a consultation paper in early August, which will outline the factors considered by the AEMC in determining whether a request should be treated under an expedited process.  Stakeholders can object to the rule change being made under an expedited rule change process within two weeks of publication of the consultation paper. 

National Energy Retail Rules

No retail rule change requests were received in July. No AEMC determinations relevant to the NERR were published.

National Gas Rules

No gas rule change requests were received in July. No AEMC determinations relevant to the NGR were published.

Market updates

Gas Supply Guarantee Mechanism 

AEMO issued 'threat to system security' notices on 11 and 18 July 2022 due to ongoing depletion of gas storage levels at the Iona storage facility in Victoria.  AEMO then activated the Gas Supply Guarantee mechanism on 19 July 2022 to source additional gas from Queensland-based gas producers.  AEMO expects the gas supply guarantee and threat to system security mechanisms to remain in effect until 30 September 2022 or until gas supplies are sufficient and the threat to gas supply has subsided. 

Market updates

AEMO Services, as the NSW Consumer Trustee, released a Draft Tender Pack for the inaugural tender opening on 4 October 2022 for Long-Term Energy Service Agreements (LTESAs) and Access Rights as part of the NSW Electricity Infrastructure Roadmap . The materials in the Draft Tender Pack cover the initial allocation of Central-West Orana (CWO) Access Rights under the draft CWO Renewable Energy Zone (REZ) Access Scheme Declaration.  A final Tender Pack is expected to be released by the end of August 2022.  See our recent energy alert for more information.

The NSW Government released a Draft Access Scheme Declaration, Access Rights and Scheme Design Position Paper, Guidelines for Access Scheme Declarations and Final REZ Access Standards on 15 July 2022 as part of the CWO REZ Access Scheme.  The Draft Declaration sets out:

• eligibility requirements for projects to connect to new network infrastructure within the CWO REZ;
• the initial capacity of access rights (in MW) that may be granted to projects (including generation, storage and co-located hybrid projects);
• procedures for granting access rights;
• the process for increasing the amount of capacity granted to projects; and
• the duration of access rights. 

 Submissions on the Draft Declaration are due by 12 August 2022.  See our recent energy alert  for more information.

Guidelines

The AER released its final Interim Ring-fencing guideline (electricity transmission)  on 6 July 2022.  The guideline addresses an identified enforceability issue but is otherwise in substantially the same form as the previous version of the guideline.

The AER released its final Retail Exempt Selling Guideline (version 6) on 15 July 2022.  The final guideline introduces a new hardship policy condition intended to ensure that residential customers in embedded networks who experience payment difficulties due to hardship can have access to adequate support to better manage their energy bills.  The final guideline also incorporates revisions to  support exempt sellers to understand their compliance obligations and ensure protections are afforded to customers.

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

Authors: Cassandra Wee, Partner, Andre Dauwalder, Senior Associate, Harriet Curran, Lawyer and Rachel Sweeney, Graduate.