Retailer Reliability Obligation

The Retailer Reliability Obligation (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 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 RRO commenced on 1 July 2019.

Register of Retailer Reliability Obligations.

South Australia ministerial arrangements to trigger the RRO

On 9 January 2020, the South Australia Minister for Energy and Mining triggered the RRO in South Australia for the first quarters of 2022 and 2023. 

Under South Australia’s declaration, the details of the prescribed periods are:

  • each weekday from 10 January 2022 – 18 March 2022 for the trading periods between 3pm and 9pm EST; and
  • each weekday from 9 January 2023 – 17 March 2023 for the trading periods between 3pm and 9pm EST.

As of 7 February 2020, South Australian MLO generators Origin, AGL and Engie are required to start performing the MLO.

The South Australian Minister may make a T-3 instrument (under NEL Part 7A 19B (1)) if it appears to the Minister on reasonable grounds that there is real risk that the supply of electricity in all or part of South Australia may be disrupted to a significant degree on 1 or more occasions during a period in the instrument.

Before 1 July 2022, the Minister may make a T-3 reliability instrument at least 15 months before the start of the specified period, after 1 July 2022 the Minister can only make a T-3 reliability instrument three years before the specified period.

A T-3 reliability instrument must state

  • the region of the national electricity market to which it applies (all or a part of which must be located in South Australia);
  • the first and last days of the period;
  • the trading intervals for which liable entities may be required to hold net contract positions that are sufficient to meet their share of the one-in-two year peak demand forecast for that period; and
  • AEMO's one-in-two year peak demand forecast for the period referred to

Before making the T-3 instrument they Minister must consult with the AER and AEMO. The T-3 reliability instrument takes effect from the date of publication in the South Australian Government Gazette. The Minister may also vary or revoke the T-3 reliability instrument via a subsequent notice in the gazette.

Auditor panel

Rule 4A.E.5 of the National Electricity Rules requires the AER to establish and maintain a panel of auditors. The Auditor Panel Handbook acts as a supplementary guide to the Interim contracts and firmness guidelines. It specifies governance arrangements, including how we will establish and maintain the Auditors Panel, and our monitoring and oversight of the Auditors Panel.

The initial panel was established on 5 December 2019. Applications for the Auditors Panel can be made at any time. More information on the panel of auditors.

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 guideline Interim guideline published Final guideline published

Reliability Instrument Guideline

Complete

31 July 2019

31 July 2020

Market Liquidity Obligation Guideline

Complete

30 August 2019 31 December 2020

Contracts and Firmness Guideline

Complete

30 August 2019 31 December 2020
Forecasting Best Practice Guideline

Complete

20 September 2019

30 November 2020

Opt-in Guideline

September 2019 No interim arrangements

30 June 2020

Reliability Compliance Procedures and Guideline Consultation mid 2020 No interim arrangements 31 December 2020