Regulation Impact Statement Updates

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Victorian jurisdictional derogation – reliability and emergency reserve trader (RERT) contracting

COAG
20th March 2020

COAG Decision Regulation Impact Statement – Australian Energy Market Commission

On 12 March 2020, the Australian Energy Market Commission (AEMC) released a final rule determination and accompanying final rule titled: National Electricity Amendment (Victorian Jurisdictional Derogation - RERT Contracting) Rule 2020.

This rule applies only in Victoria, and complements the reliability and emergency reserve trader (RERT), which is a last resort mechanism allowing the Australian Energy Market Operator (AEMO) to pay for additional capacity to be on stand-by in case of emergencies when the electricity demand and supply balance is tight.

The final provides AEMO with the flexibility to enter into multi-year contracts of up to three years under the long notice RERT mechanism in Victoria, in order to help address short to medium-term reliability challenges facing that state. The rule also places requirements on AEMO’s decision making that aim to minimise costs and market distortions associated with multi-year contracting.  In addition, the rule includes specific reporting requirements on AEMO to make the following information public in its quarterly RERT reports:

  • any contracts that have a term greater than 12 months,
  • an explanation of why such contracts were entered into for a term greater than 12 months, including the basis on which AEMO considered the term and volume to be reasonably necessary to ensure the reliability of supply in the Victorian region,
  • the basis on which AEMO had regard to the RERT principles when entering into the multi-year contracts,
  • an explanation of how AEMO had regard to the Retailer Reliability Obligation (RRO) in relation to the length of a multi-year contract and the volume of RERT procured, and
  • an explanation for how each multi-year contract has lower total costs than other types of RERT contracts covering the same period of time (in aggregate).

The final rule specifies that the derogation will be in place for approximately three years, and end on 30 June 2023.

The final determination has been assessed by the Office of Best Practice Regulation as compliant with requirements for a Council of Australian Governments Decision RIS.

 

Please note: any accessibility queries should be directed to the Australian Energy Market Commission.

 

 

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