AER’s 2021-2022 compliance and enforcement priorities: FCAS & Gas

The Australian Energy Regulator (AER) today released five compliance and enforcement priorities for 2021-22 to signal the key areas where behavioural change in the energy industry is required.

AER Chair Clare Savage said the AER will be focusing on generator businesses as one of the priorities to ensure they are able to provide the services they offer to the electricity market, and comply with dispatch instructions issued by the Australian Energy Market Operator (AEMO).

“The AER has observed concerning behavior regarding Frequency Control Ancillary Services (FCAS), which are purchased by AEMO through the spot market to ensure the energy system is secure and reliable,” Ms Savage said.

A generator was fined $200,000 earlier this year for allegedly failing to ensure it could provide FCAS offered to the market, and was required to return $1.13 million it was paid by AEMO to provide the service.

“Generators are paid to be available to provide FCAS, even if their services are not required.  The AER will be monitoring the market to ensure that generators who offer FCAS are able to provide these services at all times,” Ms Savage said.

“The AER will also be monitoring compliance by generators with dispatch instructions issued by AEMO, with a particular focus on recent rule changes preventing weather-reliant generators, such as large scale wind and solar farms, from reducing their output when they are instructed by AEMO to generate electricity.”

The energy transition means that renewable energy generators are becoming an increasingly significant part of our generation mix. Given this change, there is a need to ensure that these obligations are fully understood and widely complied with.

“We will also be monitoring service providers in the gas market to ensure they comply with the disclosure of financial information and other terms required by the Gas Rules,” Ms Savage said.

“Failure to provide information in accordance with the Gas Rules undermines the effective regulation of gas pipelines and can negatively impact the efficient investment in, and use of pipelines, to the detriment of users in the market.”

The current ACCC Gas Inquiry has observed conduct from pipeline operators including non-compliance regarding access requests and negotiation requirements under the Gas Rules, and this behaviour undermines Part 23 of the Gas Rules.

There has also been a growth in the usage of the Day Ahead Auction (DAA), which is designed to enhance access to gas pipeline capacity on a more flexible basis.

“The AER has observed issues with the timeliness and accuracy of gas auction reporting,” Ms Savage said.

“The flow of information is critical to the effectiveness of the auction, which helps to ensure transparency in the market as well as the integrity of the DAA, so the AER will be monitoring compliance in this area.”

The AER’s key compliance and enforcement priorities for 2021-22 are:

  • Effective identification of residential consumers in financial difficulty and offer of payment plans that have regard to the consumer’s capacity to pay;
  • Ensure embedded network compliance with exemption conditions, including consumer access to Ombudsman schemes;
  • Focusing on registered generators’ compliance with AEMO dispatch instructions and their ability to comply with their latest offers at all times;
  • Ensure service providers meet information disclosure obligations and other part 23 National Gas Rules obligations; and,
  • Ensure timely and accurate gas auction reporting by registered participants.

In developing the priorities the AER took into account a range of information including compliance intelligence from AER activities and insights from AEMO, state and territory energy departments, energy Ombudsman offices and consumer groups.

In addition to these five priority areas, we will continue to act where there are serious issues impacting vulnerable consumers, including life support consumers, or to help shape new or emerging markets as well as progressing previously identified priority areas.

The AER has new oral examination powers and courts may order substantially increased penalties for breaches of the National Energy Laws with maximum penalties for certain provisions now the greater of $10 million, three times the benefit obtained from the breach, or 10% of annual turnover.

Find out more on the AER’s Compliance and Enforcement Priorities 2021-22.

Issued date: 
23 June 2021
AER reference: 
NR 16/21
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