Jurisdiction - Australia
Reports and Analysis
Australia – Disorderly Bidding: Rule Change? AER Monitors Compliance.

24 February, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Energy & Project Finance

 

What You Need To Know

 

  • The Australian Energy Market Commission has commenced consultation on the Generator ramp rates and dispatch inflexibility in bidding rule change, submitted by the Australian Energy Regulator, which proposes a requirement for generator ramp rates and dispatch inflexibility profiles to reflect technical capabilities of generating plants.
  • The Australian Energy Regulator has released the Quarterly Compliance Report for the period October to December 2013. This report summarises the compliance monitoring and enforcement activities in the wholesale electricity and gas sectors during this period.
 

What You Need To Do

 

  • Make submissions on the Generator ramp rates and dispatch inflexibility in bidding rule change by 27 March 2014.
  • You will need to watch this space to see if any of the Australian Energy Regulator’s compliance monitoring or enforcement activities result in changes which affect your business.
  • Ensure you continue to meet all your compliance obligations and ensure all dispatch offers and rebids are made in good faith.
 

Disorderly Bidding – Rule Change Proposed By AER


The Australian Energy Market Commission (AEMC)has released the consultation paper for the Generator ramp rates and dispatch inflexibility in bidding rule change request (Rule Change) submitted by the Australian Energy Regulator (AER). All documents associated with the Rule Change can be found here.


Rebidding has been a key focus of the AER’s compliance reporting process. The AER is also focussed on disorderly bidding including issues associated with rebidding, ramp rates and inflexible bidding.


The AER considers that ramp rates and dispatch inflexibility profiles can, and have been, used by generators to achieve commercial objectives. This can lead to inefficient market outcomes and may effect system security.


Under the Rule Change, the AER proposes requirements for generator ramp rates and dispatch inflexibility profiles to reflect the technical capabilities of the generating plant at all times.


Ramp Rates


Currently the National Electricity Rules (Rules) provide that the minimum ramp rate is 3MW/minute or 3% of the maximum generation for a scheduled generator.


Under the Rule Change, the AER seeks to amend the maximum ramp rates to require participants to submit a ramp rate that is the maximum the relevant generating unit can safely attain at that time.


We expect that this change could have significant impacts for generators in their bidding and rebidding activities.

 

Dispatch Inflexibility Profiles


When bidding “inflexible”, the Rules allow the participant to provide a dispatch inflexibility profile. The Australian Energy Market Operator is not to issue a dispatch instruction that is inconsistent with the dispatch inflexibility profile.


Under the Rule Change, the AER proposes to make it a requirement that the dispatch inflexibility profile must reflect the actual MW capacity and time inflexibilities of the generating unit at that time. Any breach will be subject to a civil penalty.


The Rule Change could have a significant impact on bidding and rebidding, especially for fast start generators.


AER Quarterly Compliance Report


On 11 February 2014 the AER released the Quarterly Compliance Report (Report) for the period October to December 2013 (Quarter). We discuss the notable areas addressed in the Report below.


Strategic Compliance Projects


The Report touches on the outcomes of the AER’s strategic compliance projects which concluded in the Quarter. Specifically, the following projects are discussed:

 

  • medium term projected assessment of system adequacy data accuracy;
  • electricity metering metrics;
  • performance of ancillary services for regulation;
  • trends in power system operating incident reports; and
  • electricity transmission connections.
 

The Report highlights the electricity transmissions connections project (ETCP). The ETCP arose in response to concerns raised by connection applicants about the transmission network connection process. The ETCP assesses compliance by transmission network service providers against the Rules to determine connecting customer’s satisfaction with the connection process.


The AER is currently considering the findings and will report on this in the next quarter.


Update On Gas Investigations, Compliance Matters And Projects


The Report provides an update of the AER’s investigation, compliance and enforcement work in the gas markets. In particular, participants’ responsibilities in the short term trading market (STTM) and Bulletin Board.


The Report highlights that throughout the Quarter there were six incidents of non-compliance with the requirements of the STTM (predominantly incidents of late or incorrect capacity data). One non-compliance resulted in a requirement to pay under an infringement notice.


Update On Electricity Investigations, Compliance Matters And Projects


The Report discusses rebidding and the AER’s strategy with respect to enforcing generator rebidding reason requirements. The Report identifies that during the Quarter, the AER issued the following three warnings for rebids that did not meet the requirements of the Rules:

 

  • an initial warning with respect to a rebid which did not contain a time or a verifiable or specific reason;
  • a warning for a rebid where no technical reason was given for the generator’s ramp rate reducing below the minimum ramp rate of 3MW/minute; and
  • a warning for a rebid where no technical reason was given for making the plant inflexible.
 

Next Steps

 

Consultation On The Rule Change


If the Rule Change is likely to affect your business, you should review the consultation paper on the AER’s Rule Change request and provide any submissions to the AEMC by 27 March 2014. Ashurst is available to provide assistance to any participants who would like to make a submission.


Quarterly Compliance Report


You will need to watch this space to see if any of the AER’s compliance monitoring or enforcement activities result in changes which affect your business. As always, you need to ensure that you meet all your compliance obligations.

 

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For further information, please contact:

 

Paul Newman, Partner, Ashurst
paul.newman@ashurst.com

 

Peter Limbers, Partner, Ashurst
peter.limbers@ashurst.com

 

Liza Carver, Ashurst
liza.carver@ashurst.com


Teresa Scott, Ashurst
teresa.scott@ashurst.com


Yun Ho, Ashurst
yun.ho@ashurst.com


Julia Goncalves, Ashurst
julia.goncalves@ashurst.com

 

Ashurst Energy & Project Finance Practice Profile in Australia

 

Homegrown Energy & Project Finance Law Firms in Australia

 

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