Regulation Impact Statement Updates

Official website for publishing regulatory impact analysis information for regulatory decisions announced by the Australian Government, COAG and COAG Councils.

Removal of Intervention Hierarchy

18th June 2020

On 18 June 2020, the Australian Energy Market Commission (AEMC) released the draft rule determination and draft rule titled National Electricity Amendment (Removal of intervention hierarchy) Rule 2020.

The draft rule replaces the existing requirement for AEMO to use reasonable endeavours to intervene using RERT prior to issuing directions or instructions with a principle that AEMO must use reasonable endeavours to choose the intervention mechanism, or combination of intervention mechanisms, that is effective in addressing the need to intervene in the market while minimising the direct and indirect costs of intervention. The draft rule also extends transparency and accountability arrangements to encompass AEMO's decision-making on the selection of intervention mechanisms. The draft rule actions a recommendation made by the AEMC in its Interventions investigation final report.

The AEMC believes that the draft rule will better contribute to the achievement of the National Electricity Objective (NEO) by promoting more efficient operation of electricity services with respect to price. The rule will also provide the flexibility to deploy the least cost and most effective suite of options if it becomes necessary for AEMO to intervene in the market during times of supply scarcity. The AEMC considers existing requirements that preference the use of RERT may preclude lower cost and more effective options for intervention, under some circumstances leading to higher costs for consumers.

The AEMC intends that the final rule should come into effect prior to summer 2020-21 due to supply scarcity conditions that predominately occur during summer. This proposed implementation schedule set out in the draft rule requires AEMO to publish interim procedures by 19 October 2020 and final procedures by 3 May 2021.

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

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