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Five minute settlement: Submission in response to the AEMC Consultation Paper

Author

Oliver Derum

Energy Consumers Australia (ECA) welcomes the opportunity to provide comment on the Australian Energy Market Commissiom’s (AEMC) consultation paper Five minute settlement (the Consultation Paper).

The Consultation Paper is the first step in the public consultation for a rule change proposed by Sun Metals that seeks to align dispatch and settlement intervals in the wholesale electricity market.

The rule change seeks to address the problem of generators gaming the current arrangements by creating price spikes in wholesale prices at the start of half-hour trading intervals and then lowering their bid price to zero so that their output is more likely to be dispatched. When the price for a half hour period is calculated, this bidding behavior creates distorted outcomes that increase prices above efficient levels. While the small business and residential consumers are not directly exposed to the wholesale market, the efficient functioning of that market is important for ensuring that those consumers pay no more than is necessary for their electricity services. The National Electricity Law requires that such markets operate in the long term interest of consumers.

The rule change addresses a problem that has existed for many years but has not been satisfactorily resolved. Accordingly, ECA welcomes the proposed rule change. Any amendments that increase the rigor of the wholesale market and drive more efficient behavior from generators are in the long term interests of consumers.

The full read here.