The JEC made a submission to the draft report of the Australian Energy Market Commission’s (AEMC) review of the three existing electricity compensation frameworks. The frameworks govern how electricity market participants are made whole after being directed to supply to the market during a period of market stress, hen the administered price cap (APC) is triggered, or when the market is suspended. The frameworks have been reviewed following an experience in 2022 of market participants withdrawing supply in order to be directed to supply due to preferring the compensation associated with being directed to the revenue received from standard participation.
The JEC supports the intention of the AEMC to bring the frameworks into line with one another and reduce the incentives for market-distorting behaviour.
We provided suggestions on the formal objectives of each framework, including adding an explicit reference to consumers’ interests to each.
We also commented on the treatment of opportunity costs in the proposed new frameworks, noting that it cannot be used to compensate for the impacts of administered pricing, as this would undermine the intent and working of the cap.
This is an ongoing piece of work that the JEC will continue to contribute to.
Reducing unfair fines and over-policing from alcohol-free zones