ERM Power pays penalty for alleged failure to follow dispatch instructions

ERM Power Retail Pty Ltd (ERM Power) has paid penalties of $40 000, following the issue of two infringement notices by the Australian Energy Regulator.

The AER issued the infringement notices because it had reason to believe that ERM Power failed to follow dispatch instructions from the Australian Energy Market Operator (AEMO) for one of the generating units at Oakey Power Station (Oakey) in Queensland on both 23 March and 21 September 2015.

The notices were issued following a detailed review by the AER into ERM Power’s compliance with dispatch instructions at Oakey over a nine month period in 2015. The review identified numerous instances of potential non-compliance by ERM Power with AEMO dispatch instructions when operating its Oakey generators during this period.

“Failures to follow AEMO dispatch instructions can have serious implications for security of the power system,” AER Chair Paula Conboy said.

“In this instance we considered that it was appropriate to issue infringement notices for the two most serious instances identified by the AER’s review.”

“ERM Power has fully cooperated with the AER and undertaken a number of actions in response to the AER’s compliance review, including conducting compliance training and implementing new systems to improve Oakey’s ability to respond to dispatch instructions. These actions and cooperation were taken into account in determining the AER’s enforcement response,” Ms Conboy said.

The infringement notices issued to ERM Power cover two specific instances of non-compliance:

  • On 23 March 2015, one of the Oakey generating units came online and generated power earlier than instructed by AEMO; and
  • On 21 September 2015, one of the Oakey generating units received instructions from AEMO to stop generating. The trader chose not to comply with this instruction, and instead kept the generating unit on in anticipation that an instruction to generate would be received later in the trading interval.

The AER can issue an infringement notice where it has reason to believe a business has contravened a civil penalty provision of the National Electricity Law or 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.

Background

The National Electricity Market (NEM) is a wholesale market in which generators sell electricity in eastern and southern Australia. Registered generators make offers into the market to produce electricity at various prices in each five minute dispatch period in a day.

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

There is a legal obligation upon registered participants to follow dispatch instructions issued by AEMO unless to do so would, in the participant’s reasonable opinion, be a hazard to public safety or materially risk damaging equipment. A failure to comply with a dispatch instruction constitutes a breach of the National Electricity Rules. 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.

ERM Power is the owner and operator of Oakey Power Station in Queensland. Oakey Power Station consists of two 171 MW generating units. ERM Power also retails electricity to customers across all mainland NEM regions.

Sector: 
Segment: 
Issued date: 
11 May 2016
AER reference: 
NR 008/16
Contact: 
AER Media inquiries 1300 138 917