CS Energy pays penalties and provides court enforceable undertakings to the AER

Queensland generator CS Energy Limited (CS Energy) has paid penalties totalling $80 000 and provided court enforceable undertakings following the issue of four infringement notices by the Australian Energy Regulator.

The AER issued four notices because it had reason to believe that CS Energy failed to follow dispatch instructions issued by the Australian Energy Market Operator (AEMO) in February and April 2014 to the generating units at the Wivenhoe Power Station and also failed to ensure that the offers submitted to AEMO for generating units at the Gladstone Power Station reflected actual capabilities to generate power at all times.

“The AER considers that the efficiency of the national Electricity Market and system security may be compromised when dispatch offers made by generators do not reflect their actual capabilities, and where generators fail to comply with the dispatch instructions given by AEMO,” AER Board member Jim Cox said.

“Compliance with obligations relating to dispatch offers and instructions is an enforcement focus for the AER and we will not hesitate to take appropriate enforcement action to deal with non-compliance.  In determining our response in this case, we took into account CS Energy’s cooperation, including the provision of court-enforceable undertakings. These undertakings involve CS Energy committing to various corrective actions, including reviewing operating systems and procedures and improving compliance training in this area,” Mr Cox said.

Two infringement notices related to CS Energy’s alleged failure to cease generating at Wivenhoe on two instances on 13 and 20 February 2014, resulting in over-generation by 256 megawatts (MW) and 208 MW respectively. The other two infringement notices relate to CS Energy’s alleged failure to ensure that its generating units were capable of complying with the offers submitted to AEMO by CS Energy.  The AER was concerned that CS Energy advised AEMO in its dispatch offer that Gladstone generating units were capable of increasing or decreasing output at a particular rate when they were not. This contributed to those units generating above the dispatch instructions issued by AEMO following receipt of the offer.

The AER can issue infringement notices where it has reason to believe a generator is in contravention of a civil penalty provision of the National Electricity Rules. 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.

CS Energy is a major generator with some 3 600 MW of installed generation capacity in the NEM. CS Energy is the registered participant for the Gladstone Power Station, which is owned and operated by third parties. CS Energy is a Queensland Government owned corporation.

Sector: 
Issued date: 
4 July 2016
AER reference: 
NR 12/16
Contact: 
AER Media inquiries 1300 138 917