Generators are required to offer to supply energy into the National Electricity Market in good faith. The Australian Energy Market Operator (AEMC) accepts offers from generators and dispatches those generators in order of least cost to meet demand.
Rebidding allows generators to alter these offers in response to changes in circumstances. The good faith provision of the National Electricity Rules requires a generator to honour its offer to the market unless there is a change in the material conditions upon which the offer was based.
Rebids that are not made in good faith can adversely affect the accuracy of information upon which market participants rely. This provision was designed to improve the reliability of information, including price forecasts, that is necessary for the efficient operation of the wholesale electricity market.
On 28 July 2009, the AER instituted proceedings against Stanwell Corporation Ltd, alleging a breach of the good faith provision of the Electricity Rules in February 2008. On 30 August 2011, the Federal Court dismissed the AER’s case.
The Federal Court’s interpretation of the Good Faith rebidding provision has highlighted that the current rule does not provide the desired controls on behaviour anticipated when it was introduced nor does it meet the high level policy objectives previously agreed to by NEM Ministers. In November 2013 the SA Minister for Minister for Mineral Resources and Energy submitted a Rule change proposal seeking to address these issues.
Consultation paper
As the first step in the consultation process, on 10 April 2014 the AEMC published a consultation paper. On 22 May we lodged a submission supporting the SA Minister’s rule change proposal.
AER submission on AEMC rule change - Bidding in Good Faith consultation paper - 22 May 2014
Stakeholder forum
On 5 May 2014, the AEMC held a stakeholder forum in Melbourne to facilitate discussion on the key issues in the rule change request. The AER presented at this forum.
Options paper
On 18 December 2014, the AEMC published an options paper to test stakeholders’ views on a number of alternative potential options identified to address the rule change request, and to continue the assessment of the proposed rule. Our submission to the Options Paper supported the AEMC exploring the possibility of introducing a broader behavioural statement of conduct and/or gate closure mechanism. However, we continues to urge the AEMC to remain focussed on assessing the SA Minister’s rule change proposal.
AER submission to AEMC - Bidding in good faith options paper - 12 February 2015
Draft determination
On 16 April 2015, the AEMC made a draft rule. The main features of the draft rule were:
- the “good faith” requirement to be replaced by “false or misleading”.
- generators to vary offers as soon as practicable.
- additional reporting requirements to be imposed on variations to offers made close to dispatch.
Our submission to the draft determination supported the AEMC’s draft rule as a means to address late rebidding, subject to enhancements to improve enforceability.
AER submission cover letter to AEMC - Bidding in good faith draft determination - 11 June 2015
AER submission to AEMC - Bidding in good faith draft determination - 11 June 2015
Public forum
A public forum was held in Brisbane on 18 May 2015 to provide an opportunity for interested stakeholders to share their views. The AER presented at this forum.
Second draft determination
The AEMC published a second draft determination on 17 September 2015. Consistent with the first draft rule of April 2015, the second draft rule:
- replaces the “good faith” requirement with “false and misleading”.
- requires generators to vary offers as soon as practicable.
However, in a departure from the first draft rule, rather than imposing reporting requirements on generators for offers made close to dispatch, the second draft rule introduces a requirement for generators to preserve a contemporaneous record of the circumstances surrounding late rebids.
Our submission to the second draft determination supports the AEMC’s draft rule as a means to address concerns with late strategic rebidding.
AER submission to AEMC - Bidding in good faith second draft determination - 30 October 2015
More information
More information about AEMC's rule change - Bidding in Good Faith.