NECA: Final report into market’s performance in extreme conditions in January and February 2000
NECA has published its final report into the events of 23 January and early February. That report is available to download.
On 23 January there was a simultaneous loss of two generators in South Australia and Victoria. A fall in frequency occurred when units at Bayswater, Mount Piper and Torrens Island tripped in quick succession. This combination represented a loss of 1400MW, or just over 10 per cent of demand. Newport also tripped a few minutes later. The frequency did not recover within the time prescribed in the frequency standard set by the Reliability Panel. In the first weeks of February, the effect of industrial action at Yallourn was exacerbated by record high demand. Demand exceeded supply in Victoria and South Australia, and there was significant involuntary load shedding both regions. On 4 February, Victoria imposed mandatory restrictions which continued until 10 February.
This latest report follows up the preliminary report we published in March. That report pointed to a number of means for minimising the extent of involuntary loadshedding in similar extreme circumstances in future. The final report notes that the recommendations of our capacity mechanisms review, which it also notes have now received interim authorisation or are the subject of a draft determination by the ACCC, will help to minimise the extent of involuntary loadshedding and introduce improved arrangements, including scope for appropriate public policy oversight, for determining reserve thresholds consistent with the standards set by the Reliability Panel. The final report also recommends that:
where involuntary loadshedding is nonetheless necessary, and where restrictions are introduced, those restrictions should be integrated into the market through a combination of reserve contracting and refinement to the existing ‘what-if’ pricing arrangements; and
the pricing provisions in the code should be amended to ensure that the price is set at VOLL whenever, but only when, there is a supply/demand imbalance in the energy market. Prices should not be adjusted retrospectively.
The Code Change Panel will shortly initiate consultation on draft changes to the code intended to give effect to these recommendations.
NECA has also investigated a number of the operational aspects of the events of January and February, including:
the effectiveness of the current ancillary service arrangements, in particular for control of frequency and network loading, and NEMMCO’s management of those arrangements
the provision of information to the market
NEMMCO’s use of its powers of direction and
the performance of market participants, including the extent of compliance with the generator connection requirements set out in chapter 5 of the code.
Some of those operational aspects are, however, relevant to a contractual dispute between two market participants under the terms of their contract. It would be inappropriate to publish our report on those aspects until that dispute is resolved.
