Regulation Impact Statement Updates

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

Changes to Intervention Mechanisms

COAG
22nd June 2020

COAG Decision Regulation Impact – Australian Energy Market Commission

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

The draft rule removes the mandatory restrictions framework and the obligation to counteract during an intervention and clarifies the basis for affected participant compensation cost recovery following activation of emergency reserves under the reliability and emergency reserve trader (RERT). The mandatory restrictions framework is used as a means of controlling demand and averting or reducing the need for mandatory load shedding. However, the framework has not been used since its inclusion in the National Electricity Rules (NER) in 2001. The advantages to its removal is that it may directly reduce costs to consumers by removing the need to recover the costs of any mandatory restrictions offers from market customers. The obligation to counteract during an intervention details that the Australian Energy Market Operator (AEMO) may seek to offset the impact of an intervention by issuing counteraction instructions to adjust the dispatch targets of certain market participants. This obligation is designed to confine the impact of the intervention to one region, or, if possible, one participant. Both of these changes complement the new clarifications around compensation cost recovery, which outlines that if an intervention event leads market participants to be dispatched differently, these participants may be entitled to compensation. The draft rule actions various recommendations 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 improving the efficiency and clarity of intervention mechanisms. Submissions on the draft determination and draft rule are due by 30 July 2020.

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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