AGL power stations handed multimillion-dollar fines over emergency breaches

Two AGL power stations have been handed fines after they admitted to inadvertently breaching their promise to be available to supply emergency power.

Loy Yang power station in the La Trobe valley. Picture: Aaron Francis

A Federal Court judge has ordered two AGL companies each pay multimillion-dollar fines after they admitted to breaching pledges to remain on standby to release electricity during emergencies.

Handing down a judgment in the matter on Monday afternoon, judge Catherine Button said she accepted penalties of $2.8m for Victorian power station Loy Yang A and $3.2m for NSW-based power station Bayswater first proposed by the Australian Energy Regulator at a hearing last week.

Justice Button noted the “vital importance” of power generators being able to supply contingency energy and said she was satisfied the fines would deter similar conduct in the future, and reflected the duration of the problem and the ­financial position of AGL.

She noted each of the two companies admitted they had breached their promises inadvertently after they made offers to the Australian Energy Market Operator and were paid to be on standby to provide “contingency frequency control ancillary services” when they could not meet dispatch instructions if they needed to.

“(Loy Yang A contravened) the National Electricity Rules … during the period 23 December 2019 to 22 May 2020 because the respondent did not operate its equipment to ensure that it could provide contingency frequency control ancillary services,” Justice Button said.

As well, she said Loy Yang A “did not ensure that its ancillary service generating unit was at all times able to comply with the latest market ancillary service offer that it had made to AEMO for the relevant trading interval”.

During the period between September 2, 2018, and August 25, 2020, Justice Button said, the Bayswater power station did not ensure “it could provide delayed raise contingency frequency control ancillary services which complied with dispatch instructions received from AEMO”.

Further, during the same period the power station failed to make sure its ancillary service generating unit could comply with its offer to AEMO. Both power stations operate coal-fired power generating units, where the “frequency influence setting” at two of the generators in each location was set to off, Justice Button said in her judgment.

“That was not, in and of itself, a problem,” she said. “The contraventions arose because while the frequency influence setting was switched to ‘off’ … they were unable to provide all the contingency for which they bid, and received dispatch instructions while that setting was switched to ‘off’.”

Justice Button said the issue arose from a “lack of communication” between operating teams and trading teams.

“Since the discovery of the issue – initially raised by AEMO and then investigated by the respondents – those policies and procedures have been revised, to the satisfaction of the AER,” she said.

Justice Button said the companies proactively investigated the issues, revised their policies and co-operated with regulators. She ordered the companies to pay costs as well, including $35,000 to be paid by Loy Yang A and $40,000 to be paid by Macquarie.