The Australian Energy Regulator today imposed a penalty of $60,000 on the State Electricity Commission of Victoria, trading as Vicpower Trading, when the AER issued three infringement notices over Vicpower Trading's failure to accurately reflect its capability in the National Electricity Market.
Vicpower Trading offers frequency control services into the National Electricity Market on behalf of an aluminium smelter at Point Henry, near Geelong in Victoria. The smelter's three potlines are separately registered by the National Electricity Market Management Company (NEMMCO) to provide frequency services.
On 16 January 2007, bushfires caused the main transmission links into Victoria to fail interrupting electricity supplies to the smelter. The smelter shut down and was unavailable to provide frequency services for more than 30 minutes.
Vicpower Trading continued to offer frequency control services into the market even though it was unable to provide the services. The AER has reason to believe that the failure by Vicpower Trading to revise its bids following the shutdown of the three smelter loads amounts to a breach of clause 4.9.8(d) of the National Electricity Rules.
The AER has decided to issue three $20,000 infringement notices for this conduct.
"NEMMCO is required to ensure that the power system is operated in a safe and secure manner," AER Chairman, Mr Steve Edwell, said today.
"In order to achieve this, NEMMCO has to maintain frequency levels within a specified range. NEMMCO acquires frequency support services from Vicpower Trading and other service providers. These services are purchased from industry participants by means of a market arrangement. When frequency levels go too low NEMMCO directs the providers of these services, such as large electricity users like Point Henry, to cut their electricity consumption in accordance with offers accepted by NEMMCO. The reduced consumption restores frequency levels.
"Failure to provide services when required by NEMMCO compromises system security. For this reason, the AER believes it appropriate to rigorously enforce this area of the rules to ensure that any threat to the safe and secure operation of the power system is minimised.
"The potential breach is particularly significant given that Vicpower Trading was paid for services which it failed to deliver.
"In this instance, the AER has opted to issue infringement notices rather than seek higher penalties from the Federal Court. This decision recognises that Vicpower Trading has cooperated fully with the AER's inquiries and is putting in place the necessary arrangements to ensure compliance in the future."
Under the rules, payment of the penalty does not entail an admission by Vicpower Trading that it breached the rules. If Vicpower Trading pays the infringement penalty, the matter will be closed. If, however, the penalty is not paid, the AER has the power to institute proceedings in the Federal Court.
Background
The relevant provision of the National Electricity Rules dealing with the responsibilities of market participants with respect to frequency control ancillary services is clause 4.9.8(d).
Clause 4.9.8(d) provides that a market participant that has classified a load as an ancillary service load must ensure that the ancillary service load is at all times able to comply with the latest market ancillary service offer for the relevant trading interval.
The AER issued three infringement notices pursuant to section 74 of the National Electricity Law alleging that the SECV (trading as Vicpower Trading) breached clause 4.9.8(d) of the National Electricity Rules by failing to ensure that at all times it was able to comply with the latest market ancillary service offer with respect to its ancillary service loads PTH01, PTH02 and PTH03 when all ancillary service loads were shutdown. Clause 4.9.8(d) is a relevant civil penalty provision within the meaning of section 73 of the law. The infringement penalty for a breach of this clause is $20,000.
The AER's enforcement tools range from the infringement notice used in this case, to legal action seeking penalties of up to $100,000 for each breach of the rules.