SA energy users under Retailer Reliability Obligation from 2022

The Retailer Reliability Obligation (RRO), put forward by South Australian Minister for Energy and Mining, Dan van Holst Pellekaan, will come into effect in South Australia for the first quarters of 2022 and 2023.

The RRO is designed to support reliability in the National Electricity Market (NEM). In particular, it encourages retailers, and some large energy users, to establish contracts for their share of demand for a prescribed period.

If a T-1 reliability instrument is made in late 2020, retailers in South Australia will be obligated to establish contracts and report the details to the Australian Energy Regulator (AER).

Under South Australia’s declaration, the details of the prescribed periods are:

– Each weekday from 10 January 2022 – 18 March 2022 for the trading periods between 3pm and 9pm EST
– Each weekday from 9 January 2023 – 17 March 2023 for the trading periods between 3pm and 9pm EST

As of 7 February 2020, large generation businesses in South Australia, namely Origin, AGL and Engie, will be required to offer contracts for the prescribed periods at specific times on the Australian Securities Exchange (ASX). This is a requirement under the Market Liquidity Obligation (MLO).

The Australian Energy Regulator (AER) has a monitoring and compliance role to ensure that Origin, AGL and Engie offer appropriate products on the ASX as required.

The Australian Energy Council (AEC) has expressed concerns over the decision, as invoking the RRO for South Australia alone is likely to put upward pressure on electricity prices for the state.

The Australian Energy Council’s Chief Executive, Sarah McNamara, said the obligation was designed to only be invoked by the independent Australian Energy Market Operator and Australian Energy Regulator.

“Investment confidence comes from market decisions made independent of government,” Ms McNamara said.

“For that reason, industry opposed granting South Australia with this discretionary interventionist power. It distorts the market and increases risks and costs for market participants.”

Ms McNamara said that the lack of shortfall in meeting the Reliability Standard made it difficult to understand the rationale for this decision.

“South Australia, even with the retirement of the Osborne and Torrens Island A Power Stations, will have sufficient electricity supply to reliably meet the needs of electricity customers. This is likely to improve further with the expected approval of the Energy Connect interconnector to New South Wales,” Ms McNamara said.

“The Retailer Reliability Obligation was designed to forecast three years out any shortfall in supply to give retailers enough time to source additional supply.

“Imposing this additional burden means retailers will need to have additional contracts in place by January next year or potentially face penalties. This will have an impact on retailers and retail competition in the state.

“This kind of intervention will affect energy companies’ planning, purchasing, building and contracting strategies, and will lead to businesses inefficiently allocating capital and spending money to address risks which are not presently being forecast. These costs will ultimately be worn by customers.”