AEMC rule change - Five minute settlement

Sun Metals Pty Ltd (Sun Metals) proposes changes to the NER to address the mismatch between the time intervals for operational dispatch and financial settlement in the NEM.

Sun Metals is of the view that the mismatch between the dispatch and settlement intervals leads to inefficiencies in the operation and generation mix of the market. It submits that this aspect of the market design provides incentives for generators to withdraw capacity to influence price outcomes and impedes some categories of participants from entering the market.

Sun Metals proposes a possible solution that involves compulsory five minute settlement for generators. Demand side participants in the wholesale market, including retailers and large consumers, could choose to be settled on either a five or the current 30 minute basis.

Generators, scheduled loads and MNSPs would be settled on a five minute basis using:

  • existing five minute prices calculated by AEMO; and
  • energy from existing revenue meters, allocated to the five minute periods within a half hour using operational data from supervisory control and data acquisition (SCADA) systems.

Other wholesale market participants, including retailers and large consumers, could choose to be settled on either a five or 30 minute basis. All participants may choose, at their own cost, to install metering equipment capable of accurately measuring energy on a five minute basis.

As five minute settlement would be optional for the demand side of the market, AEMO would need to operate concurrent five and 30 minute settlement for different participants. This arrangement would create an imbalance between the money earned by supply side participants settled on a five minute basis and the money paid by demand side participants, who could be settled on either a five or 30 minute basis.

Sun Metals proposes a new mechanism to correct the imbalance. The imbalance amount, which could be positive or negative, would be recovered entirely from those demand side participants who continue to be settled on a 30 minute basis.

Consultation Paper

On 19 May 2016, as the first step in the consultation process, the AEMC published a consultation paper. On 16 June 2016, we lodged a submission that supports the AEMC’s investigation of the costs and benefits of implementing the proposed rule changes with respect to aligning the dispatch and financial settlement intervals in the National Electricity Market.

Our submission contends that the alignment of the timing of settlement and dispatch should enhance competition by more accurately reflecting participant behaviours in their market revenues, valuing flexibility and responsiveness that may encourage new technologies and more directly reward demand side response.

AER submission to AEMC rule change - Five minute settlement consultation paper - 16 June 2016 ( DOCX 66.68 KB | PDF 29.49 KB )

More information

More information on the AEMC rule change can be found on the AEMC website.