AGL set to be fined millions over compliance fail

Two separate power stations in NSW and Victoria are set to be fined millions after admitting they were not ready to supply power in an emergency.

Two AGL power suppliers have been handed a combined $6m fine after admitting to breaching their promise to remain on standby in the event of an emergency, like a bushfire, and release electricity to customers.

NSW based AGL Macquarie is set to be penalised $3.2m and Victorian based AGL Loy Yang is set to be penalised $2.8m after both AGL subsidiaries agreed 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, the Federal Court heard on Thursday.

For the energy regulator, James Arnott SC told the court while all parties agreed the conduct was not deliberate and the power companies have cooperated with the court action from the outset, the companies should be handed fines to ensure future compliance.

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

“(The supplier) must ensure the ancillary service generating unit … is at all times capable of responding,” he said.

The suppliers, in this case the Bayswater power station located in the Hunter Valley and the Loy Yang A power station in Gippsland needed to install and maintain monitoring equipment to check the supplier could deliver what they agreed to if required.

The purpose of these agreements is to ensure stability in the market at all times, and that customers continue to access power in emergencies.

Mr Arnott said “maintaining power system security” is at the heart of the issue.

“(Power accessibility) has a real world significance to the consumers of electricity,” he said.

As Australia turns away from coal generated power to renewable energy sources, the importance of these agreements is “increasing” Mr Arnott said.

Federal Court Judge Catherine Button clarified that suppliers who agree to provide frequency control ancillary services in simple terms are “paid to be ready”.

Following the hearing, a spokesman for AGL said the conduct was inadvertent and AGL has implemented new processes to prevent the mistake from happening again

“At certain times over 2018 to 2020, units at Loy Yang and Bayswater power stations had an incorrect setting on the frequency influence switch at times when they had been enabled to provide contingency FCAS services,” he said.

“Those units consequently could not provide those services at those times.

“All of the funds initially received for the provision of the services were returned to AEMO following discovery of the issue.”

Between December 2019 and May 2020, two generating units at the Loy Yang A power station a “switch” that regulated settings for power output was off at various points in time due to maintenance and there was miscommunication between plant operators and the trading team.

Loy Yang A, which supplied 30 per cent of Victoria’s energy needs at the time and was one of the state’s biggest plants, could not respond to a shock in the system in January 2020 when required, the court heard.

Bayswater, also the biggest plant in NSW and supplied 20 per cent of the state’s energy needs at the time, encountered an issue with its switch too.

Barrister Ruth Higgins SC for AGL told the court as soon as the company became aware of the issue it took steps to improve compliance failure programs.

“(There was) no actual loss or damage was caused by the contraventions,” she said.

Justice Button thanked the parties for cooperating and said she will issue formal orders in the matter.