Announcement date
17 November 2022
Link to announcement
https://www.aemc.gov.au/rule-changes/amending-administered-price-cap
Problem being addressed
The Administrative Price Cap (APC) is an important market setting under the National Electricity Rules which operates to stabilise the electricity market during periods of volatility and sustained high prices. If market prices in a region rise to levels which are likely to cause substantial financial stress, then those prices are capped at the APC until they return to lower levels. In June 2022, the APC was applied, however due to international events and local fuel constraints, market fuel prices for peaking generators rose to unprecedented levels, causing some gas and liquid-fuelled generation to be more expensive to operate than the price allowed for under the previous level of the APC. This ultimately led to AEMO’s suspension of the spot market.
Two rounds of consultation were conducted during the rule change process, with feedback on support including a focus on the benefits to security and reliability, and opponents concerned with potential increases in financial stress on retailers and end users.
The final determination included assessment of the proposal against five criteria, including consideration of the outcomes for consumers. A key element of these impacts are likely avoidance of some compensation costs.
Proposal
The Australian Energy Market Commission announced on 17 November 2022 that they have made a final rule on introducing a transitional arrangement of increasing the APC from $300/MWh to $600/MWh from 1 December 2022 to 30 June 2025.
Assessed IA outcome
Compliant decision IA