The guidelines are two of six guidelines that the AER will develop to set out how it will exercise its functions under the Retailer Reliability Obligation (RRO).
When the Retailer Reliability Obligation is triggered, the National Electricity Rules will require retailers (and large customers who choose to opt-in) to procure electricity contracts to meet their share of electricity demand. Retailers must submit a record of their contracts to the AER in a Net Contract Position (NCP) report.
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Different types of electricity contracts will be more or less effective at protecting a retailer from high prices. This is a contract’s “firmness”. Retailers must reflect this in their NCP report, by taking into account the firmness of each individual contract. The Draft Interim Contracts and Firmness Guideline sets out how a retailer should do this. The Guideline also details how and when a retailer must submit its NCP report to the AER.
In terms of best practice, the RRO may be triggered if the Australian Electricity Market Operator’s (AEMO) annual forecast identifies a reliability gap in three years’ time.
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The significant obligations imposed by the RRO means that forecasting best practices and processes are critical.
The AER Draft Interim Forecasting Best Practice Guidelines seeks to support this best practice, particularly in relation to the transparency and quality of the reliability forecasts.
The AER will publish the final Interim Contracts and Firmness Guidelines on August 31 and the Best Practice Guidelines on September 30.
Both are open for consultation until June 19.