AGL and EnergyAustralia pay penalties for alleged failure to follow electricity market dispatch and offer rules

AGL has paid a penalty of $20 000, and EnergyAustralia has paid total penalties of $40 000, following the issue of infringement notices by the Australian Energy Regulator (AER).

The AER issued two infringement notices to EnergyAustralia because it had reason to believe that EnergyAustralia had breached the National Electricity Rules (NER) by failing to follow Australian Energy Market Operator (AEMO) dispatch instructions, at EnergyAustralia’s electricity generating units at Hallett Power Station in South Australia and Yallourn Power Station in Victoria.

The AER issued one infringement notice to AGL because it had reason to believe AGL had breached the NER by failing to ensure its electricity generating unit at Somerton Power Station in Victoria was able to perform at the capability offered to AEMO for dispatch.

These alleged breaches occurred on 13 January 2016, when electricity spot prices in SA and VIC exceeded the $5000/MWh regulatory price threshold, which triggers an AER review.

The AER’s detailed review indicated that during the high price events, EnergyAustralia’s Hallett Power Station and Yallourn Power Station increased output without having regard  to dispatch instructions from AEMO. The review indicated that an error in AGL’s systems resulted in an incorrect offer for the Somerton generating unit being submitted to AEMO.

"Our review of the high price events identified incidences where the AER considered that generators owned by EnergyAustralia and AGL did not comply with dispatch instructions issued by the Australian Energy Market Operator," AER Board member Jim Cox said.

"The AER’s compliance work plays an important role in protecting the efficiency and security of the National Electricity Market," Mr Cox said.

"System security may be compromised when dispatch offers made by generators are not accurate and where generators fail to comply with dispatch instructions given by the Australian Energy Market Operator," Mr Cox said.

"The reliable supply of electricity to consumers depends upon the power system being operated in a secure manner," he added.

The AER can issue infringement notices where it has reason to believe a generator has breached a civil penalty provision of the NER. The payment of a penalty specified in an infringement notice is not an admission of a breach or an admission of liability by the relevant participant.

Background

The National Electricity Market (NEM) is a wholesale market in which generators sell electricity in eastern and southern Australia. Scheduled generators make offers into the market to produce electricity at various prices in each five minute dispatch period in a day. Among other things, these offers include specific details about a generator’s technical capabilities.

AEMO issues dispatch instructions to generators, based on offers and other market conditions. AEMO instructions ensure that supply and demand is safely balanced every minute of the day.

There is a legal obligation on these NEM participants to follow dispatch instructions issued by AEMO unless to do so would, in the participants’ reasonable opinion, be a hazard to public safety or materially risk damaging equipment. Scheduled generators must also ensure that their generating units are capable of complying with the latest dispatch offer at all times. A failure to comply with a dispatch instruction or to ensure offers reflect unit capability constitutes a breach of the National Electricity Rules (in particular clauses 4.9.8(a) and (b)). The AER monitors these requirements and can take enforcement action when appropriate.

Compliance with dispatch instructions is essential to maintain power system security. Market outcomes may also be distorted if these instructions are not followed. Where a generator is advantaged by not following dispatch instructions, one or more other players may be financially disadvantaged.

EnergyAustralia is a major generator in the NEM with approximately 3 600 MW of installed capacity spread across the mainland NEM regions and retails electricity to customers in all mainland NEM regions. EnergyAustralia also supplies and retails natural gas in Victoria, NSW and South Australia.

AGL is a major generator in the NEM with over 10 000 MW of installed capacity spread across the mainland NEM regions and retails electricity to all mainland NEM regions. AGL also supplies and retails natural gas in Victoria, NSW, Queensland and South Australia.

About the AER

The Australian Energy Regulator regulates energy markets and networks under national legislation and rules in eastern and southern Australia, as well as networks in the Northern Territory. Its functions include:

  • monitoring wholesale electricity and gas markets to ensure energy businesses comply with the legislation and rules, and taking enforcement action where necessary;
  • setting the amount of revenue that network businesses can recover from customers for using networks (electricity poles and wires and gas pipelines) that transport energy;
  • regulating retail energy markets in Queensland, New South Wales, South Australia, Tasmania (electricity only), and the ACT;
  • operating the Energy Made Easy website, which provides a retail price comparator and other information for energy consumers;
  • publishing information on energy markets, including the annual State of the energy market report, to assist participants and the wider community.

Sector: 
Segment: 
Issued date: 
13 January 2017
AER reference: 
NR 01/17
Contact: 
AER Media inquiries 1300 138 917