Generator Performance Standards Information Booklet August 2013 Background The Australian Energy Regulator (AER) is responsible for monitoring compliance and enforcement under legislation and rules governing Australia’s wholesale energy markets, including those applying to Network Service Providers (NSP). Section 15 of the National Electricity Law and section 27 of the National Gas Law set out the functions and powers of the AER, including: monitoring compliance by energy industry participants and other persons investigating breaches, or possible breaches, of provisions of the legislative instruments under the AER’s jurisdiction. We undertake a continuous compliance risk assessment of the National Electricity Rules (Electricity Rules) and National Gas Rules (Gas Rules) to identify appropriate focus areas and monitoring mechanisms. These mechanisms include audits, the imposition of reporting requirements, market monitoring and targeted compliance reviews. Consistent with our , we aim to promote high levels of compliance, and seek to build a culture of compliance in the energy industry. A compliance culture will: reduce the risk of industry participants breaching their regulatory obligations ensure industry participants can engage confidently in commercial decisions and negotiations. In the event of a breach, we will take into account the participant’s compliance framework when determining what action to take. In assessing compliance culture, we consider whether compliance programs and related processes are effectively applied, up-to-date and tested regularly.
Good Energy Industry Practice ‘Good Electricity Industry Practice’ is a defined term under the Electricity Rules, and is the threshold against which performance standards compliance is measured. A similar definition exists under the Gas Rules. When assessing compliance against this threshold, we have adopted the concept of ‘Good Energy Industry Practice’ (GEIP) to cover both electricity and gas. We consider the key components of GEIP to include effective: Governance—internal arrangements encompassing reporting lines and supporting systems, including the level of involvement and commitment of senior management and committees as well as the overall compliance culture of the business. Expertise—the human resources dedicated to technical compliance including the allocation of responsibilities, the underlying knowledge systems and the nature and extent of the technical understanding of applicable obligations Implementation—the means by which, at a practical level, participants drive and promote compliance through internal procedures and processes, encompassing staff training, technical testing and reporting of compliance matters Performance—the overall compliance status of each participant with reference to how effectively compliance programs and arrangements operate, including the ongoing evaluation and updating of such programs and arrangements to reflect lessons learnt. GEIP is the foundation of our technical audit program outlined on page 5 of this booklet. We will assess participants’ compliance taking into account the above criteria and those outlined in our . Generator performance standards Generator performance standards (GPS) are: the specific performance standards established for each registered generator in accordance with clause 5.3.4.A(i) of the Electricity Rules, or included in the register of performance standards established and maintained by the Australian Energy Market Operator (AEMO) under clause 4.14(n) of the Electricity Rules. The Electricity Rules establish up to 18 separate technical requirements. Compliance with performance standards is fundamental to ensure AEMO can safely and reliably operate the power system. Non-compliance with certain
performance standards may materially increase the risk of major power system incidents. The Electricity Rules require generators to plan and design their facilities to ensure that, among other things, they operate in a manner that complies with the applicable performance standards (clause 5.2.5(a)). The Electricity Rules also provide that a registered participant who plans, owns, controls or operates a plant to which a performance standard applies must: institute and maintain a compliance program, within a prescribed timeframe and in accordance with certain criteria (clause 4.15(b) and (c)) maintain compliance program records and other prescribed records for 7 years and, if requested, deliver such records to the AER within 5 business days or other specified period (clause 4.15(e)) immediately notify AEMO if the plant is breaching a performance standard or is likely to breach (clause 4.15(f)) immediately notify AEMO and the relevant NSP when the plant has returned to compliance with the relevant performance standard (clause 4.15(h)). The above clauses are civil penalty provisions. This means that if the provisions are breached, the AER can issue a $20 000 infringement notice or institute court proceedings which may result in a fine of up to $100 000 and/or other appropriate court orders. With the advent of a carbon price and unfavourable economic conditions, there have been numerous cases of generators going offline or being put in ‘dry-storage’. If generating plants that are placed in dry-storage allow their technical compliance programs to lapse, there may be a heightened risk to power system security upon those plants’ return to service. For this reason, we expect generators that are offline for any period of time to continue to comply with all applicable obligations under the Electricity Rules for as long as they remain registered in the National Electricity Market (NEM). Continuing appropriate testing and maintenance of the plant should avoid non-compliance that may materially affect power system security if the generator was to return to service. AEMO holds a consistent view regarding testing and maintenance and has released a guideline on what might constitute Good Electricity Industry Practice in relation to long-term storage of generating facilities in the NEM. This guideline is available on .
assessing and monitoring the situation to ensure the existence of no systemic issues. the fact that a generator may be offline or in dry-storage will not result in any GPS being automatically closed off by AEMO or the AER while the generator remains registered in the NEM. Technical compliance audits The AER developed its compliance audit program relating to the technical performance requirements of generators in 2007. This followed an investigation into the events of 16 January 2007, when bushfires in north east Victoria caused transmission lines between Victoria, South Australia and New South Wales to trip, resulting in the separation of the national power system into three electrical islands. A number of generators who failed to meet their performance standards and to ride through this event, contributed to the system-wide disturbance. We have since conducted regular audits to ensure participants have developed and are maintaining robust and effective compliance programs. This is achieved by ascertaining whether—as required clause 4.15(c)—these compliance programs: are consistent with the template for generator compliance programs published by the Reliability Panel of the Australian Energy Market Commission (AEMC) include procedures to monitor the performance of the participant’s generating plant in a manner that is consistent with good electricity industry practice are modified to be consistent with any mandated amendments to the above template by the Reliability Panel provide reasonable assurance of ongoing compliance with each applicable performance standard. Purpose of our audits As part of each audit we explore with the participant, in detail: whether the business understands the nature of each obligation and the resulting performance expectations whether appropriate people and resources are available to monitor and test the facilities how feedback mechanisms are built into the business’s processes when issues are identified and problems rectified, including when issues are identified by other participants who have similar equipment