Energy and Climate Change Ministerial Council

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Consultation on Stage 2 of the Reliability and Supply Adequacy Framework for the east coast gas market

Publication date

On 12 August 2022, Energy Ministers directed Officials to progress a package of reforms to support a more secure, resilient and flexible east coast gas market. This included introducing a fit‑for‑purpose Reliability and Supply Adequacy Framework.

Stage 1 of the framework, which came into effect on 4 May 2023, expanded the Australian Energy Market Operator’s (AEMO) powers under the National Gas Law to better manage gas supply adequacy and reliability risks ahead of winter 2023 and beyond.

Stage 2 of the reforms builds on Stage 1. It does so by focusing on those elements of the framework which will help guide how AEMO uses its new powers. It will also facilitate timely market-led responses to future threats by providing market participants with greater predictability and transparency.

Consultation process

Officials undertook six weeks of public consultation (ending 13 July 2023). This included publicly releasing a consultation paper to seek stakeholder feedback on the need for, and high-level design options on, potential measures for inclusion as part of Stage 2 of the framework.

A virtual information session for registered attendees was held on 15 June 2023. Bilateral meetings were also held on request. The reform proposals canvassed in the consultation paper were:

  • a reliability standard
  • additional monitoring and communication tools, in particular:
    • a short- and medium‑term projected assessment of system adequacy (PASA) and seasonal PASA reporting
    • an objective threat signalling mechanism
    • an advance notice of planned closure for supply infrastructure
  • targeted reliability and supply adequacy management tools, including:
    • a reliability and supply adequacy contracting obligation
    • an administered demand response mechanism
    • a supplier of last resort mechanism that builds on the existing trading function.

Submissions

The consultation process yielded submissions from entities across the gas supply chain, including:

  • producers
  • pipeline and storage facility owners
  • gas fired generators and retailers
  • gas users
  • energy market bodies
  • other peak bodies.

Stakeholder feedback received through the consultation process informed development of the final package of proposed Stage 2 Reliability and Supply Adequacy reforms recommended to Energy Ministers. These were agreed upon on 8 December 2023.

Most stakeholders supported:

  • the establishment of a reliability standard
  • a PASA
  • an objective threat signalling mechanism
  • an administered demand response mechanism.

There were mixed responses and some concerns raised in relation to the other measures canvassed, including:

  • the advance notice of closure requirement,
  • the contracting obligation
  • supplier of last resort mechanism.

While Energy Ministers agreed not to proceed with the contracting obligation reform at this time, they did agree to proceed with the advance notice of closure requirement and the supplier of last resort mechanism.

Energy Ministers agreed to proceed with an advance notice of closure requirement as there is merit in providing greater transparency around planned closures to market participants. This ensures they have sufficient time to respond to any reliability or supply adequacy threats associated with closures.

Energy Ministers also agreed to proceed with a supplier of last resort mechanism. This is because AEMO can already use its existing trading function to act as a supplier of last resort and the reform is intended to place beneficial guardrails around AEMO’s use of this function. 

Although Energy Ministers agreed not to proceed with the contracting obligation reform at this time, they reserved the right to revisit the proposal should forecast supply shortfall risks persist in the future.

Next steps

Officials will now prepare rule change requests for submission to the Australian Energy Market Commission (AEMC). Following submission of the rule change requests, further work will be undertaken through an AEMC-led rule change process. This will enable implementation of the agreed reforms via changes to the National Gas Rules in due course.

The Stage 2 RSA reforms are, subject to the AEMC’s final determinations, expected to be progressively implemented between 2025 and 2026.

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