The RRO is designed to support reliability in the National Electricity Market (NEM) by incentivising retailers and some large energy users to contract or invest in dispatchable and ‘on demand’ resources. The Australian Energy Market Operator (AEMO) will identify any potential reliability gaps in each NEM region in the coming five years using its Electricity Statement of Opportunities.
If AEMO identifies a material gap three years and three months out, it will apply to the Australian Energy Regulator (AER) to trigger the RRO. If triggered, liable entities are on notice to enter into sufficient qualifying contracts to cover their share of demand. A Market Liquidity Obligation placed on Generators will ensure there are enough contracts available to smaller market customers.
If the market response is insufficient and the AER confirms a reliability gap one year out, liable entities must disclose their contract positions to the AER. If actual system peak demand exceeds an expected one-in-two year peak demand, the AER will assess the compliance of liable entities. AEMO may commence procurement of emergency reserves at this point through the Reliability and Emergency Reserve Trader (RERT) framework to address the remaining gap with costs to be recovered through the Procurer of Last Resort cost recovery mechanism.
The Retailer Reliability Obligation (RRO) commenced on 1 July 2019.
Guidelines to be developed
As set out in the Rules, the AER is responsible for developing a number of Guidelines on certain aspects of the RRO. Due to timing constraints the Rules specify that the AER will develop a number of interim guidelines which will be in place for one to two years. During this time the AER will run a full consultation process to develop final guidelines. The AER must develop the following guidelines:
The Reliability Instrument Guideline, explains how the AER has regard to the criteria in the rules when assessing whether or not to make a reliability instrument following a request from AEMO, how the AER will consult with stakeholders when deciding on a reliability instrument request and defines what information AEMO must provide the AER as part of a reliability instrument request.
The Market Liquidity Obligation (MLO) Guideline sets out the obligation of generators in the event of a trigger. It addresses:
- the methodology and process for determining market generator capacity
- the allocation of generator capacity amongst generator groups
- the information generators are required to provide to the AER
- the process for registering and appointing MLO nominees
- the criteria for selecting the MLO exchange
- what MLO products the AER approves
- how the AER will monitor compliance, and
- how the MLO Register will be established and maintained.
The Contracts and Firmness Guideline provides guidance on:
- the types of contracts
- the firmness methodology and how to apply it
- the criteria for approving bespoke firmness methodologies
- how adjustments to net contract position will be determined
- the reporting process for obligated parties, and
- how the AER will assess net contract position against a liable entity’s scaled demand.
The Forecasting Best Practice Guideline, outlines the forecasting process expected of AEMO. When assessing a reliability instrument request we will consider whether AEMO has followed our guideline.
The Opt-in Guideline will set out the arrangements for large consumers to opt-in to participating in the RRO themselves instead of through their retailer. The guidelines will:
- set out the process for establishing and maintaining the opt-in register
- the information to be included in the register
- the process for registration and deregistration as an opt-in customer, and
- how the AER Opt-in Guidelines will work with the AEMO Opt-in Procedures if AEMO chooses to make one.
The Reliability Compliance Procedures and Guideline will set out how the AER will assess compliance for the RRO.
Timetable for guideline development
|Guideline||Consultation on interim guideline||Interim guideline published||Final guideline published|
31 July 2019
|31 July 2020|
|31 August 2019||31 December 2020|
|31 August 2019||31 December 2020|
|Forecasting Best Practice Guideline||
30 September 2019
|30 November 2020|
|Late 2019/early 2020 TBC||No interim arrangements||
30 June 2020
|Reliability Compliance Procedures and Guideline||Consultation mid 2020||No interim arrangements||31 December 2020|