AER report into the suspension of the spot market in June 2022

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The AER’s report into the June 2022 events is an important part of understanding the behaviour of the market and identifying potential improvements to ensure that generators have a greater incentive to supply during times of system stress.

The Australian Energy Regulator (AER) has recently released its report into the market events that led to the suspension of the national electricity spot market in June 2022. The AER had received reports from stakeholders, including the Australian Energy Market Operator (AEMO), that generators were withdrawing capacity, causing AEMO to issue urgent directions to increase supply and mitigate the risk of blackouts. The investigation conducted by the AER revealed some concerning behaviour by some generators, along with some compliance issues from traders.

The investigation found that some generators had little to no regard for the effect of their actions on the broader system. Generators may have had a reasonable cause to withdraw capacity given limited fuel availability and the desire to conserve fuel for peak periods or preserve fuel stocks. However, the lack of an obligation for generators to offer available capacity and the prioritisation of commercial freedom can be detrimental to power system security, particularly under times of system stress.

The AER’s report raises a number of reform options for consideration which may tighten this aspect of the Rules to ensure generators continue to generate during times of system stress. This includes the increase in the administered price cap of $300/MWh to $600/MWh by the Australian Energy Market Commission and further discussion on the how the market can better balance the commercial imperatives of generators when the system is under stress.

The investigation also revealed some compliance issues regarding Projected Assessment of System Adequacy (PASA) submissions, late rebidding and contemporaneous record keeping, and traders effectively ignoring forecast and actual lack of reserve notices issued by AEMO during the June 2022 events. The AER is continuing to investigate one generator for possible breaches of the Rules concerning PASA submissions.

This report is an important reminder of the need to ensure that generators are compliant with the Rules, particularly during times of system stress, and that they are prioritising the security of the grid over commercial interests. It is essential that generators understand their obligations and the risks of non-compliance, and that they have the necessary tools in place to ensure they are adhering to the Rules.

Compliance Quarter’s suite of compliance solutions provides generators with the tools they need to ensure they are compliant with the Rules and are meeting their obligations to the market. Our comprehensive suite of compliance solutions includes automated monitoring and reporting, comprehensive system and process audits, and tailored compliance advice. We can help generators with the implementation of internal processes and procedures, as well as the development of internal compliance policies.

The AER’s report into the June 2022 events provides important insights into the behaviour of the market and how it can be improved to ensure better outcomes for all market participants. Compliance Quarter can help generators understand their obligations and ensure they are compliant with the Rules. Contact us today to find out more about our suite of compliance solutions.

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