On 16 May 2013 the AEMC published the final report for the review of compensation arrangements following an administered price, market price cap or market floor price.

The final report set out our recommendations regarding the compensation provisions contained in clause 3.14.6 and 3.15.10 of the national electricity rules (NER).

These recommendations are designed to improve the NER frameworks which govern how compensation claims are made and assessed, as well as how the cost of compensation is recovered from market customers

Our key draft recommendations included:

• clarifying that the primary purpose of compensation is to maintain incentives to supply energy during an administered price period;
• development of new eligibility arrangements to define when compensation should be available, and who should be eligible to claim;
• amendments to the AEMC’s process for claim assessment,
• amendments to the process for public consultation on claims; and
• amendments to the process for the recovery of the costs of compensation from market customers.

Background

On 26 May 2011, the AEMC initiated this review under section 45 of the NEL. The review was to consider the arrangements for determining and paying compensation following application of the administered price cap, administered floor price, market price cap or market floor price under clauses 3.14.6 and 3.15.10 of the rules.

On 29 November 2012, the AEMC published a draft report. Several stakeholders made submissions to this report which helped inform the AEMC’s analysis. The key issues raised in these submissions were incorporated into the AEMC’s final report.

The current rules arrangements

Clause 3.14.6 of the rules currently allows participants to claim compensation under certain conditions. These conditions include the application of the administered price cap and floor, the market price cap and the market price floor.

The AEMC is responsible for assessing these claims and determining the amount payable.

Clause 3.15.10 of the rules describes how any compensation awarded is to be recovered from market customers by the Australian Energy Market Operator (AEMO).

The Synergen compensation claim

Claims for compensation are very rare: since commencement of the NEM, only one claim for compensation has been received. This claim was made by Synergen Power Pty Ltd in 2009.

During assessment of the Synergen claim, a number of issues in clauses 3.14.6 and 3.15.10 were identified. These issues related to the situations in which parties may be eligible to claim compensation and the process for assessment of compensation claims. Accordingly, following completion of this claim, the AEMC initiated this review under section 45 of the NEL.