AEMC hands down determination on marginal loss factors

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The Australian Energy Market Commission (AEMC) has handed down its final determination on the rule sought by Adani Renewables to change the way losses are calculated by averaging them out.

The AEMC determined not to make the rule change, saying it was rejected because consumers would wear the financial cost.

The Commission found that averaging these losses out by using the ‘average loss factor’ (ALF) calculation method would shift the costs of losses onto both consumers and generators who are located where losses are lower.

“Consumers shouldn’t have the cost of individual business decisions simply transferred to them,” AEMC Chairman John Pierce said.

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“The submissions we received from the Australian Competition and Consumer Commission, Energy Consumers Australia and others support this view,” he said.

A statement from the AEMC said the Commission has made “a more preferable rule” that gives AEMO more flexibility around the way it calculates MLFs.

“We are working to give investors more information about the market. In October we changed the rules to increase transparency of new generation projects,” the statement read.

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The Clean Energy Council (CEC) has said the fact the AEMC didn’t make the rule change means investor confidence in new clean energy generation will be undermined.

CEC chief executive Kane Thornton said, “While industry welcomes debate and analysis of alternative reforms, simply retaining the current regime is deeply problematic and undermines the energy transition underway in Australia.

“The Clean Energy Council had expected that the AEMC would consider how losses could be shared by generators in a way that presents less volatility and more manageable risk, without increasing consumer costs or ignoring transmission losses.

“TheAEMC has missed an opportunity to think openly and creatively about reform to the current flawed MLF framework.”