Energy Regulator issues first report on pricing around Victorian bushfire power failure

The Australian Energy Regulator today issued an initial report into wholesale electricity pricing at and around the time the largest electricity transmission link into Victoria failed, due to bushfires.

The failure, on January 16 2007, cut off around 20 per cent of supply and followed a spike in demand for power due to high temperatures. At and around the same time the wholesale market price (or spot price) exceeded $5000/MWh, which under the National Electricity Rules triggers an AER report.

"That report must describe the significant factors that contributed to the high price, including the withdrawal of generation capacity, rebidding and network availability," AER Chairman, Mr Steve Edwell, said today.

"The AER is conducting a broader investigation into this event. Today's report is a first step in the investigation. It provides information on pricing and dispatch outcomes.

"It does not reach any conclusions about compliance with the National Electricity Rules. The AER's final findings and conclusions will be published when the investigation is completed, probably by the middle of this year.

"The investigation is focused on:

  • the obligations of electricity generators, network service providers and the National Electricity Market Management Company with respect to power system security
  • market pricing and dispatch outcomes
  • compliance by participants with dispatch instructions, and
  • the technical performance of generators and of the transmission network."


On 16 January, high temperatures across New South Wales, Victoria and South Australia saw the demand for electricity in the National Electricity Market reach a new record level. Victoria also recorded an all-time high demand of more than 9000 MW. The wholesale price for electricity in Victoria was also high at the time, exceeding $5000/MWh from 3.30 p.m. local time.

Around 4 p.m., bushfires near the transmission lines in north-east Victoria, that form part of the interconnection with the Snowy Mountains, led to a number of those transmission lines being interrupted. This triggered a number of other transmission lines in Victoria to automatically disconnect, including the interconnection with South Australia. The resulting supply/demand imbalance caused emergency control systems to operate, automatically interrupting around 2600 MW of customer load in Victoria.

The process to restore the interrupted load began immediately. The Victoria-to-South Australia interconnector was reconnected at 4.42 p.m. with all customer load in Victoria restored by 7.15 p.m.

The AER today published a report in accordance with the required timeline specified in the rules. However, because of the complexity of events that occurred on that day, this report is preliminary and necessarily inconclusive, concentrating only on spot prices prior to the power outage, and pending a full investigation report on all of the issues associated with the events of that day.

When supplies into Victoria were lost, the wholesale market for electricity was significantly disrupted. Emergency procedures were activated in an effort to restore the security of the power system and supplies to customers as quickly as possible. Given the significance of this event and its widespread implications, a full investigation by the AER was initiated immediately.

Incidents of this nature are extremely complex and require detailed analysis of a number of inter-related systems and protocols. The market operator, NEMMCO, is obliged under the rules to assess the technical performance. That work is well underway. The AER is required to assess whether all of the obligations of electricity generators, other registered participants and NEMMCO have been complied with under the rules. The AER investigation will cover matters related to the performance of the power system, and the operation of the national wholesale market arrangements.

The material in the report issued today will be used to inform the AER's ongoing investigations. The AER proposes to issue a report on its full investigation around mid-year.

Issued date: 
21 February 2007
AER reference: 
NR 003/07
Steve Edwell, AER Chairman 03 9290 1421 0423 047 554
Lin Enright, Media 02 6243 1108 0414 613 520
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