Australian Energy Regulator accuses electricity generators of capitalising on loophole and intensifying power crisis

The Australian Energy Regulator has accused electricity generators of intensifying the current power crisis via a major loophole.

The Australian Energy Regulator has accused electricity generators of intensifying the current power crisis by capitalising on increased compensation payments.

In a letter penned on Tuesday, AER chair Clare Savage suggested some generators were withholding supply in order to access the higher payments, warning them they must bid capacity into the market despite a $300MWh cap set by the Australian Energy Market Operator.

On Wednesday, AEMO said it believed 2000 megawatts of power in both NSW and Queensland had not been bid into the market.

The situation has now broadened the power supply issue across five states.

“Recently the AER has observed that following the application of administered pricing in the NEM, generators are withdrawing available capacity from the market,” Savage said.

“This behaviour may be motivated by generators seeking to avoid the administered pricing compensation process in favour of the AEMO directions compensation process.

“As you know, market participants must not, by any act or omission, whether intentionally or recklessly, cause or significantly contribute to the circumstances causing a direction to be issues, without reasonable cause.”

There is currently no law blocking power companies from withdrawing their electricity generation from the market.

In the past two days, the available volume has been reduced by two gigawatts in Victoria, 1.5 gigawatts in Queensland and three gigawatts in NSW.

Approximately 2,000 MWs of generation in both QLD and NSW, which hasn’t bid into the market, can be directed by AEMO to help meet forecast electricity shortfalls this evening. Our latest statement is available here: https://t.co/Pm2HpBNIShpic.twitter.com/br5qQTA15e

— AEMO (@AEMO_Energy) June 14, 2022

Energy expert at Melbourne University Dylan McConnell said while there were legitimate reasons for power companies to withhold power, the situation was “unconscionable”.

“It’s not in good faith and fairly unconscionable conduct. Yes there is some sort of justification for it, but it’s the wrong thing to do,” McConnell said via the Sydney Morning Herald.

Federal Energy Minister Chris Bowen said the energy compliance regulator is currently monitoring the situation “very, very closely” but reassured ministers that it believes there is still enough power available to the grid.

“The Australian Energy Regulator reminded [power companies] of their obligations of the law this morning,” Bowen said.

“I have been in contact with [AEMO] and they are confident the situation can be and will be avoided in NSW and Victoria in particular in coming days.

“Nobody should turn off any power usage that they need for their comfort or their safety ... nobody is asking for that to happen.”

Five states at risk

An update published on the AEMO website cautioned of maximum power load interruptions in Queensland, New South Wales, Victoria, South Australia and Tasmania.

The warnings were initially sent for the east coast of Queensland and NSW, but have now spread to hundreds of thousands of additional households across the nation.

On Monday, AEMO ordered electricity generators online in a bid to avert widespread blackouts, although there were outages in entire suburbs in Sydney’s north.

But now, AEMO is warning of more pain ahead thanks to an energy shortfall predicted in Queensland and NSW tonight as a result of plummeting temperatures and skyrocketing energy prices.

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Millions face blackouts on Tuesday night

Queensland is bracing for a serious problem tonight, between the hours of 5pm to 9pm.

In NSW, the situation will peak this evening between 5.30pm and 8.30pm.

Power interruptions are being forecast for Tasmania, South Australia and Victoria on Wednesday night.

Australian Energy Council chief executive Sarah McNamara said the burgeoning power issue would wane eventually, but there was no immediate solution in sight.

“One of the issues in the market is that a number of coal plants have had outages on the east coast of Australia, for unplanned maintenance,” Ms McNamara said.

“Once they come back online in the next couple of months that should improve supply somewhat.”

AEMO will use its powers to order operators to produce more energy during those crucial time frames, with supply reserve shortfalls tipped to hit tier 2 and 3 levels.

NSW and Queensland residents are being urged to reduce their power usage. Picture: AAP Image/Darren England

In a worst-case scenario, that means the deficit in the supply/demand balance could strip all reserve electricity.

“AEMO will take further actions to improve electricity reserves, including directing generators into the market, which helped meet electricity shortfalls in Queensland and New South Wales yesterday,” AEMO said in a statement on Tuesday morning.

Residents of both states have also been urged to conserve power during those peak times as a result.

“By carefully managing electricity use at home and in your workplace, the community can help ensure that power system security is maintained in Queensland,” Powerlink Queensland chief executive Paul Simshauser told 9 News.

“Community safety and wellbeing is important so only manage energy consumption if it is safe to do so.”

‘Bumpy period’ ahead

Newly-installed Minister for Climate Change and Energy Chris Bowen told Sunrise this morning that it was “more important than ever to manage the transition and get more energy into the system and more storage and transmission”.

He also assured Australians the crisis was being “very actively managed” by both state governments and AEMO, which saw Queensland avoid any load shedding blackouts on Monday evening.

“That was avoided because the operator could instruct the generators to put more power into the system. It also told me that they believe we can avoid load shedding and blackouts in NSW and other states today,” Mr Bowen said.

“Of course, they will continue to work very hard and actively monitor the system.

“The system is being actively managed and we have avoided any load shedding … I believe and I am advised that we should be able to avoid that in the next 24 hours.”

However, given we’re only two weeks into a colder than usual winter, Mr Bowen warned we were in for a

The market regulator has

NSW and Queensland residents are being urged to reduce their power usage. Picture: AAP Image/Darren England

“bumpy period” ahead.

“ … there is no doubt about that. I said that consistently. Our system is under pressure. We have a lot of coal-fired power station outages,” he said.

Minister for Climate Change and Energy Chris Bowen told Sunrise the situation was under control. Picture: AAP Image/Steven Saphore

“There is a big chunk of coal-fired power out of action in Queensland. That has led to higher prices.”

Mr Bowen said the war in Ukraine, flooding and colder than usual temperatures had exacerbated the problem and “increased load on the system”, but insisted things were under control.

“We can have confidence in our operators, regulators, working together with the states, there is a real spirit of co-operation in the state and federal table,” he said.

“Don’t care what political party, don’t care what state, we are working together to manage the situation and I believe that will result in a better situation for energy consumers and avoid blackouts and certainly minimise the risk of any load shedding activities.

“There can be unexpected outages from coal-fired power … that nobody is expecting. They will be managed. I’m not here to give a magic guarantee, but I am here to say that everything that could be done is being done very actively.”

Power crisis a ‘national disgrace’

Meanwhile, Nationals Senator Matt Canavan has described the energy crisis as a “national disgrace” as the threat of winter blackouts linger.

Mr Canavan told 2GB’s Ben Fordham the nation must “eat humble pie” and return to coal-based power.

“What is the argument against building a coal-fired power station? Just build one – it’s not going to blow the planet up,” he said.

Originally published as Australian Energy Regulator accuses electricity generators of capitalising on loophole and intensifying power crisis