Submission to the AEMC Review of Electricity Compensation Frameworks

PIAC made a submission to the Australian Energy Market Commission’s Review into Electricity Compensation Frameworks.

We argued that while maintaining the integrity of the market is a worthy goal, the regulatory system already recognises that consumers (and others) are best served by allowing interventions that balance the benefits of a market-based system with other valid aims. From a consumer perspective the aim should be to strike a balance between the costs of market benefits and the benefits to consumers.

To this end, and based on the experience of the 2022 energy crisis, we oppose any increase in the quantum of compensation generators receive following periods of administered pricing, market suspensions or directions, as this will increase the incentive for generators to withdraw capacity when it is needed most in order to access compensation.

We support new positive obligations on generators to provide capacity during Lack of Reserve (LOR) 2 or LOR3 conditions.

Finally, we argued that the frameworks as a whole should be geared towards minimising the risks of overcompensating generators rather than the risks of undercompensating them. Generators have a mechanism for seeking additional compensation in certain circumstances when they feel they have not been made whole, while consumers have no equivalent mechanism for seeking redress when generators have been overpayed.