An overview of market rules in Australia's wholesale electricity market presented as part of a workshop on Nigeria's transitional electricity market held in Abuja 2015.

1. Interpretation & Understanding of
the Nigerian Transitional Electricity
Market Rules

2. www.transafricanenergy.com
Dr Stephen Labson
slabson@transafricanenergy.com
Trans African Energy Pty Ltd
Advisory and consulting services
Australia’s National Electricity Market
Electricity Market Rules
Abuja 15 September 2015

3. 3
Industry unbundling
Generation
Transmission
System & Market
Operator
Distribution
Retail supply
Market reform
Competitive wholesale
market
Retail competition
Independent SMO
Decentralised
Planning*
RegulatedT&D
Shareholding
Mixed ownership
Generation and
retail largely
private
T&D private and
state-owned

4.  Australian Energy Market Operator
(AEMO)
 System & Market Operator *
 National Transmission Planner
 Energy Market Development
 Corporate entity under Australian
Corporations Law.
 Board comprised of government and
industry representatives
 Operating costs recovered from Market
Participants
* AndGas Markets Operator
Policy, Administration and Regulatory
 Ministerial Council on Energy (MCE)
 Legislation and policy development
 Australian Energy Market Commission
(AEMC)
 Rule change and policy advice to MCE
 Australian Energy Regulator (AER)
 Regulation of network tariffs
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5. Market Generators
 ‘Gross pool’ – Generators sell all
electricity output through the spot
market.
 Dispatch categories
 Scheduled generation >30 MW
 Semi-scheduled generation > 30
MW intermittent supply.
 Non-scheduled generation < 30 MW
Market Customers
 Purchase electricity supplied to a
connection point on a NEM transmission
or distribution system at spot price.
 Electricity Retailers: buy electricity at
spot price and on-sell it to end-use
customers.
 End-use Customers: buy directly from
the market for own use.
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Network service providers
• Transmission Network Service Provider
• Distribution Network Service Provider

6.  Regions and interconnectors
largely based on Australia’s legacy
state based industry structure
▪ Five regional reference
nodes
▪ Five regulated
interconnectors
 Queensland
 New South Wales
 Victoria
 South Australia
 Tasmania
NB We will come back to WesternAustralia later
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ISMO

8. Marketoperations*
Prudential requirements
Central dispatch and
price determination
Ancillary services
Network losses and
constraints
Generation and system
adequacy
Settlements
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The NER (Version 77) is established
under legislation covering (among
other matters):
• Market participants’ rights and
obligations
• Market operations
• Regulatory investment test
• Economic regulation of network
tariffs
• Power system security
• Metering and IT
• Dispute resolution
* NB. Market Rules Chapter 3 NER.

9.  Spot market and pricing
 Spot market managed in real-time
through a centrally-coordinated
dispatch process.
 Generators offer supply bids with
specific amounts of electricity at
particular prices., ramp rates, etc
 Offers are submitted every five
minutes of every day.
 A dispatch price is determined
every five minutes.
 Six dispatch prices are averaged
every half-hour to determine the
spot price for each NEM region.
Price determination
 Source:AEMO
 Spot price capped at AUD $12 500/MWh
 Dispatch BIDS capped AUD $-1000/MWh
 NB to balance swap arrangements

10.  Inter-regional losses from the regional reference node in one region to the
regional reference node in an adjacent region.
 Inter-regional loss factors:
 Describe marginal losses from a regional reference node in one region to the
regional reference node in an adjacent region
▪ for a particular time period ; and
▪ a defined range of operating conditions (i.e. loads)
 Inter-regional loss factor equations per AEMO methodology.
 Used in the central dispatch process to reflect the cost of inter-regional
losses.
Units dispatched according to bid price / loss factors / system constraints
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11. Ancillary Services
1. AEMO operates eight separate markets for the delivery of Frequency
Control Ancillary Services (FCAS)
1. FCAS providers bid their services into the FCAS markets in a similar way
to how generators bid into the energy market.
2. AEMO purchases Network Control Ancillary Services (NCAS) and System
Restart Ancillary Services (SRAS)
1. Procured under competitive tenders with service providers.
 Charges are allocated on a user pays principle.
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13.  Gross pool
 Market Participants deal with
AEMO- NOT with each other
when selling or buying wholesale
electricity.
 Limited recourse w.r.t.
AEMO
 Payments to Generators are
limited to the money available to
AEMO from receipts from
Market Participants
 AEMO has powers to draw
down on credit support if a
market participant is in
default of payments.
 Any shortfall in AEMO’s
recovery from any Market
Participant in relation to a
billing period is shared across
the generators of electricity by
reducing the amount paid to
them for electricity supplied
through the Market in that
billing period.
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14. 14
 Risks from price volatility (wholesale market capped at AUD$
12,500/MWh)
 Rapid payment obligations
 Largest retailer (20% of NEM) with spot price at $12,500/MWh will increase
exposure toAEMO at over $1Million per minute
 Risk of non payment covered by bank guarantees with AEMO
 AEMO typically holds $1.5Billion to $3.5Billion in bank guarantees
 Level of guarantee (Max Credit Limit) driven by energy traded, average price and
price volatility
 Daily review of participant exposures
 Rapid payment requirements when near limits
 Default then suspend if obligation not met
 Rapid retailer of last resort required

15.  AEMO must administer medium term and short term projected assessment of
system adequacy (PASA.)
 On a weekly basis AEMO must collect and analyse information from all
Scheduled Generators, Market Customers, Transmission Network Service Providers
and Market Network Service Providers about their intentions for:
 generation, transmission and market network service maintenance scheduling;
 intended plant availabilities;
 energy constraints;
 And plant conditions which could materially impact upon power system security
and reliability of supply; and significant changes to load forecasts previously
notified to AEMO; and
 for the following 24 months prepare the unconstrained intermittent generation
forecasts for the following 24 months,,,
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16. Statement of Opportunities
 AEMO publishes a 10 year forecast
of Opportunities each year.
 This publication provides
information to assist market
participants assess the future need
for :
 electricity generating capacity,
 demand side capacity; and
 augmentation of the network
NationalTransmission Network
Development Plan
As the NationalTransmission Planner for
the electricity transmission grid. AEMO
 provide historical data and projections
of network utilisation and congestion;
 summarise emerging reliability issues
and potential network solutions; and
 present information on potential
network augmentations and non-
network alternatives to projected
congestion.
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17.  The Australian market operator has identified the following issues as shaping
market operations going forward:
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Will regulation impede
uptake of new tech
and services?
Will technology
overtake incumbent
firms?
Can markets and policy
preferences find a
balance?

18. Dr Stephen Labson
Trans African Energy Pty Ltd
slabson@transafricanenergy.com
www.transafricanenergy.com
18