Brisbane gas hub to commence in December

The Brisbane Short Term Trading Market (STTM) hub is scheduled to commence operations on 1 December, following market trials that began in August. The STTM is a market for the trading of natural gas at the wholesale level at defined hubs between pipelines and distribution systems.

The Australian Energy Regulator (AER) has been monitoring market trial data in the Brisbane hub, in particular the provision of accurate and timely data by participants.

Market trial data indicates that there has been systematic under-forecasting of demand, leading to substantial deviations and a requirement for large MOS payments and large differences between ex ante and ex post prices.

“The resulting ex ante trial prices are lower than what they should have been, and result in some participants paying/receiving more for any shortage/surplus of gas,” the AER stated in its latest wholesale markets quarterly compliance report.

The AER’s latest report covers the July-September period and also summarises the AER’s compliance monitoring and enforcement activities in the electricity and gas markets.

During the trial some participants did not submit injection offers and/or withdrawal bids, resulting in inefficient pricing outcomes.

While the trial is intended to test systems and processes for the new STTM hub in Brisbane, the AER intends to monitor the market closely from its commencement to ensure participants comply with requirements in relation to demand forecasts and gas offers/bids.

Queensland Energy Minister Stephen Robertson said the STTM would encourage competition, improve the flexibility and transparency of the Queensland gas market.

“What the Brisbane STTM means is participants will have more choice in purchasing gas supplies and price transparency ensures that the price of gas set daily by the market properly reflects the true supply-and-demand situation,” Minister Robertson said.

The AER will engage with the Australian Energy Market Operator (AEMO) and participants to ensure compliance with all requirements of the Gas Rules and the STTM procedure.

There were two data failures noted for the gas Bulletin Board, with AGL Upstream Investments and Esso Australia Resources failing to provide actual flow data for their production plants within the required timeframe.

AGL found there was an error with its transaction logs and added an item to its daily checklists to confirm there are always four transaction logs on the Bulletin Board for each gas day. Esso conducted an internal review and ascertained that the cause was human error.

The AER will not pursue these incidents further but expects all participants to note these examples and remedies to ensure that such data failures are minimised in the future.

During the quarter there were three separate incidents where market participants nominated injection quantities at the Longford injection point that were inconsistent with AEMO scheduled quantities. The AER will continue to make inquiries into this matter and will provide an update in a future report.

The AER welcomes comments and feedback from industry participants and other parties on matters of compliance, including the specific areas targeted, or proposed to be targeted, for review.

Generator rebidding to be examined

The AER has adopted generator rebidding reasons as one of its special projects for 2011, according to the July-September wholesale markets quarterly compliance report. The AER considers that accurate and timely information is a cornerstone of the National Energy Market (NEM) design.

The AER’s rebidding enforcement strategy, set out in the AER’s Compliance Bulletin No. 3, came into effect on 1 March 2011. Generators that submit offer, bid and/or rebid information that does not meet the requirements of the Electricity Rules will receive two warnings. On a third occasion within six months, the AER will consider issuing an infringement notice.

During the September 2011 quarter, the AER issued two initial warning notices and two second warning notice as a result of two rebids which failed to include a time adduced and two rebids which did not include a brief, verifiable and specific reason.

In accordance with the three-stage process, when six months has elapsed from the date participant received an initial warning, the participant’s ‘warning count’ is reset to zero. In this quarter the AER reset two participants’ counts to zero.

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