Multiple risks for uncertain benefit:

The development of Optional Firm Access (OFA) has a long history.  The context in which the concept of OFA was first conceived was very different to that in which it is now being developed. In this submission PIAC looks at the risks and benefits of proceeding and concludes that it appears that OFA is only beneficial if congestion is a material issue in the decades to come, if the proposed solution adequately addresses the issue and does not create additional risks or uncertainties. The submission outlines risks inherent in the proposal including the development of a highly complex system; the potential for over-investment with a duplicate standard; and the risk of imperfect information in calculating the long run incremental cost, implementation costs and jurisdictional risk. In addition, PIAC is strongly opposed to the proposed transition arrangements to grant firm access to existing generators because this is a wealth transfer of new property rights from the public to incumbent generators. Overall, PIAC’s view is that the benefits of OFA are marginal and highly conditional, while the risks are significant. As such PIAC recommends that AEMC and AEMO inform the COAG Energy Council at its next meeting that OFA is not worth pursing, rather than reporting this in mid-2015.