The Australian Energy Market Operator (AEMO) has proposed a new global settlement framework for retailers participating in the wholesale electricity market, with the Australian Energy Market Commission (AEMC) seeking feedback on the request.

AEMO is responsible for settlement in the national electricity market – making sure that market generators are paid for the energy they provide and retailers pay for the energy they use.

Currently, a local retailer is appointed to a distribution area and bears responsibility for all unaccounted for energy (UFE) in their area. UFE includes unaccounted for technical losses, estimation errors and commercial losses. Of these contributors to UFE, local retailers are only able to manage their own commercial losses.

Under current rules, UFE costs may only be passed through to customers of the local retailer, rather than all customers in the distribution area. However, more retail competition has meant that a growing number of customers are served by independent retailers, not local retailers. This means that UFE is potentially being shared amongst fewer customers.

The aim of the proposed new framework is to treat all retailers equally by allocating a share of UFE to all retailers in a distribution area. Under global settlement, AEMO would also be able to fully reconcile the market. This would allow settlement errors to be more easily identified, reducing the likelihood of disputes.

AEMO proposes that the IT system capability for global settlement should be developed at the same time as the design and build activities required for the introduction of five minute settlement in 2021.

Stakeholder submissions are due by 5 July 2018.

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