AER says power companies are capitalising on loophole

Upwards view of transmission tower against sunrise (AER)
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The Australian Energy Regulator (AER) has penned a letter accusing electricity generators of intensifying the current energy crisis by capitalising on increased compensation payments.

AER chair Clare Savage accused some generators of withholding supply in order to access higher payments, warning them they must bid capacity into the market despite a $300MWh wholesale price cap set by the Australian Energy Market Operator (AEMO).

Related article: AEMO caps prices, warns Queenslanders to conserve power

AEMO estimated 2GW of power on the east coast had not been bid into the market.

“Recently the AER has observed that following the application of administered pricing in the NEM, generators are withdrawing available capacity from the market,” Savage said.

“This behaviour may be motivated by generators seeking to avoid the administered pricing compensation process in favour of the AEMO directions compensation process.

“As you know, market participants must not, by any act or omission, whether intentionally or recklessly, cause or significantly contribute to the circumstances causing a direction to be issues, without reasonable cause.”

There is currently no law prohibiting power companies from withdrawing their electricity generation from the market.

According to The Australian, the past two days has seen the available volume reduced by 2GW in Victoria, 1.5GW in Queensland and 3GW in NSW.

Federal Energy Minister Chris Bowen said the energy compliance regulator is currently monitoring the situation “very, very closely” but reassured ministers that it believes there is still enough power available to the grid.

“The Australian Energy Regulator reminded [power companies] of their obligations of the law this morning,” Bowen said.

Related article: How Australia’s energy crisis can be solved with a focus on renewables, not a capacity market

“I have been in contact with [AEMO] and they are confident the situation can be and will be avoided in NSW and Victoria in particular in coming days.

“Nobody should turn off any power usage that they need for their comfort or their safety … nobody is asking for that to happen.”