Australia’s National Electricity Market Wholesale Market Operation

Executive Briefing Disclaimer: All material in this publication is provided for information purposes only. While all reasonable care has been taken in preparing the information, NEMMCO does not accept liability arising from any person’s reliance on the information. All information should be independently verified and updated where necessary. Neither NEMMCO nor any of its agents makes any representation or warranty, express or implied, as to the currency, reliability or completeness of the information. ©NEMMCO 2005 – All material in this publication is subject to copyright under the Copyright Act 1968 (Commonwealth), and permission to use the information must be obtained in advance in writing from NEMMCO. Section 1

Contents

Introduction 2 Section 1: Market Operator 2 History of Electricity Supply in Australia 3 Design of the NEM 4 Regional Pricing 4 The Spot Price 4 Value of Lost Load (VoLL) 5 Gross Pool and Net Pool Arrangements 5 Locational and Nodal Pricing 5 Energy-only Market 5 Section 2: Operating the Market 6 Registration of Participants 6 Generators 7 Scheduled and Non-scheduled Generators 8 Market and Non-market Generators 8 Market Network Service Providers 8 Scheduled Loads 8 Monitoring Demand 9 Forecasting Supply Capacity 9 Participation in Central Dispatch 9 Bidding 10 Pre-dispatch 11 Spot Price Determination 12 Scheduling 12 Dispatch 14 Failure to Follow Dispatch Instructions 14 Section 3: Operating the Ancillary Services Markets 15 Ancillary Services 15 Ancillary Services Generators 15 Frequency Control Ancillary Services 16 Other Ancillary Services 17 Section 4: Interaction Between the Market and the Power System 18 Access to Transmission and Distribution Networks 18 Technical Operating Limits and Standards 19 Reliable Operating State 19 Secure Operating State 19 Issues that Impact on Price 20 Energy Losses 20 Constraints 21 Section 5: NEMMCO’s Intervention in the Dispatch Process 22 Issuing Directions 22 Reserve Trading 22 Load Shedding 23 Pricing in Extreme Conditions 23 Section 6: Principal Power Stations, and Interconnectors 24 Index 29

 Section 1

Introduction

Electricity markets are inherently complex. Much of their complexity comes from the fact that electricity trade involves the interaction of principles from both electrical engineering and financial markets. Additionally, because electricity supply underpins national economic activity, the electricity supply industry is regulated by law and its reliable function is a high political and social priority.

The National Electricity Market Management Company Limited (NEMMCO) fulfils the dual roles of market operator and system operator for Australia’s National Electricity Market (NEM). This means that NEMMCO is responsible for managing both the wholesale spot market in electricity and the transmission elements of the physical power system that underpins the operation of the NEM.

Managing the spot market in electricity involves balancing short-term supply and demand through a centrally-coordinated dispatch process. This process drives the operation of the electricity pool to which all registered generators contribute their output in response to dispatch instructions, and from which all market customers purchase their electricity needs.

Market Operator

Under National Electricity Law, NEMMCO is responsible for managing and operating the NEM in accordance with the National Electricity Rules. The NEM is the mechanism through which electricity is physically traded between registered generators and market customers. Trade in electricity takes place dynamically, 24-hours-a-day and seven-days-a-week.

NEMMCO is required to balance supply with demand by scheduling the most cost-effective generators into production. Many of the processes that constitute NEM trade are automated through sophisticated information technology systems, while the functions of forecasting demand and managing congestions on the network rely to a considerable extent on the input and monitoring of operators.

Supply and demand must be balanced in each of the NEM’s regions simultaneously. NEMMCO’s management of the market must take into account both the capacity and availability of generators to produce electricity in each of the six NEM regions, and the capacity and availability of the inter-regional transmission systems to transfer supply across region boundaries.

 Section 1

History of Electricity Supply in Australia

Historically, State and territory governments owned and operated Australia’s electricity supply assets and sold electricity at regulated prices.

During the 1990s, governments deregulated the industry and implemented a program of significant reform. The objectives of the reform included introducing competition, delivering cost-efficiencies, sharing resources, and standardising regulatory arrangements.

Building on the fact that the country’s population is concentrated in the States on the eastern seaboard, and some of the State transmission systems were already interconnected, governments created a national electricity market that shared resources and widened trade options. This meant building additional interconnectors between state networks and centralising administration and operation of the market and the transmission elements of the power system.

Today, the NEM operates in Queensland, New South Wales, Australian Capital Territory, Victoria, South Australia and Tasmania. The six regions of the NEM basically follow state boundaries, with Australian Capital Territory included in the New South Wales region, and the area surrounding the Snowy Mountains Hydro-Electricity Scheme being a region in its own right. When Basslink is commissioned for service in 2006 to enable trade between Tasmania and the Australian mainland, all six regions of the NEM will be electronically interconnected to facilitate inter-regional trade.

Figure 1 Interconnectors in the NEM QLD

QNI Directlink

SA NSW

SNO-NSW

VIC-SA Murraylink SNOWY

VIC SNO-VIC

Basslink*

TAS *Under construction

 Section 1

Design of the NEM

Electricity has certain economic and physical characteristics that determine the processes by which it is traded. Firstly, because it cannot be economically stored for future use, electricity must be dynamically produced to satisfy prevailing demand. Secondly, as it is not possible to distinguish one unit of electricity from another, determining which generator produced which particular unit of electricity is not feasible. These characteristics mean that electricity is an ideal commodity to be traded using pool arrangements.

NEMMCO aggregates electricity produced by generators into an electricity pool, and market customers purchase their electricity needs from the aggregated supply. Market forces determine the level of electricity trade and the cost characteristics of that trade. NEMMCO acts as the NEM’s clearing house, with market customers paying the spot price for the energy they consume, and NEMMCO, in turn, paying generators the spot price for the electricity they supply to the pool.

Regional Pricing

The NEM uses regionally-based pricing in which the price at each network connection point is determined in relation to a common regional reference node price. Typically, the cost of supply will increase the further the point of consumption is from the regional reference node.

When the network operates below the level of its maximum technical transfer capacity, electricity prices in different regions of the NEM are related to each other by simple real-time loss calculation. But when an interconnector is operating at its maximum transfer capacity, and therefore physically prohibits the transfer of additional capacity between regions, the prices in the different regions may vary.

The Spot Price

Trading in the NEM is based on a 30-minute trading interval. The spot price is the price applied to electricity trades through the pool for a particular trading interval in a specific region of the NEM. The spot price is the price used to settle the market, and is the average of the six dispatch price outcomes of generator bidding for the preceding half hour. That is, the spot price is the half-hourly clearing price to match supply and demand.

A regional reference node has been identified at one specific connection point to the power system in each region of the NEM. A regional spot price is calculated for each trading interval at the regional reference point, and all trade in the region is based on the regional spot price. This means that for any one trading interval in the NEM, six separate spot prices for each of the six NEM regions are used to financially settle trade between registered generators and market customers. The spot price that applies to any one transaction depends on the region of the NEM in which the trade was transacted.

The spot price for each NEM region is published at the end of each trading interval. The publication of this information provides a straightforward basis upon which registered participants can negotiate bilateral financial contracts against future movements in the spot price, and, in this way, forms the basis of the way they therefore bid their capacity into the market. The process also ensures transparency of NEM operation.

 A price cap applies to bidding and dispatch prices in the NEM. The maximum amount a generator can bid into the market is equivalent to the price cap, and is currently $10,000 per megawatt hour. The market floor price is the minimum price at which bids can be submitted to the market. Its current value is minus $1000.

Value of Lost Load (VoLL) A mechanism through which the NEM model delivers investment signals is the Value of Lost Load (VoLL), which is equivalent to the maximum possible price under the National Electricity Rules. VoLL represents the assessed value of the load that cannot be supplied in the event of a supply shortfall. The level of VoLL is reviewed annually by a panel of industry experts, the Reliability Panel.

The level at which VoLL is set must be sufficiently high to represent a financial risk that participants will seek to manage by entering financial contracts with counterparties in the market. In turn, trend movements of these financial contracts signal when new investment in electricity supply infrastructure is required to facilitate the equitable trading of electricity.

Gross Pool and Net Pool Arrangements The electricity pool of the NEM is a gross – or mandatory – pool where generators are not permitted to contract directly with market customers for the physical delivery of electricity, but are obliged to have their trades managed by NEMMCO as market operator.

In the NEM, all generators with a capacity of at least 30 megawatts are compelled to submit bids indicating their intended physical generation targets for each dispatch interval. In order to manage the financial exposure that results from the potential volatility of spot price outcomes, generators and market customers also secure financial contracts such as bilateral hedges and exchange-traded derivatives. These financial contracts operate separately from the spot market and beyond the involvement of NEMMCO.

An arrangement where producers and consumers enter bilateral contracts for the physical supply of electricity through the shared transmission network, and pro-rata levies are imposed on all participants for the use of the network is an alternative to NEM arrangements. Such arrangements are referred to as characteristics of a net or voluntary pool.

Locational and Nodal Pricing Locational pricing reflects the full costs of supplying electricity to a consumption point, and is based on the regional spot price plus the costs of transporting electricity to the consumption point. Under a different pricing model called nodal pricing, a separate price is set for every connection point on the transmission system.

The pricing model of the NEM is a hybrid of full nodal pricing and locational pricing. The National Electricity Rules provide a set of principles for establishing the regional structure and a process for the regular review of loss equations.

Energy-only Market The essential feature of an energy-only electricity market is that generators only receive payment for the electricity they produce. Their production is measured as sent-out energy by metering equipment at the point where the generators are connected to the network. In some other markets, the market manager makes payments for capacity to supply electricity as well as for actual production undertaken.

 Section 2

Operating the Market

The National Electricity Rules require NEMMCO, as market operator, to ensure there is sufficient electricity supply in the pool to satisfy prevailing demand at all times.

Under pool arrangements, the market operator matches supply and demand moment-to- moment by dispatching the lowest-cost generators into production to deliver whatever electricity is required to where it is required. At the same time, the system operator must factor any power system constraints or congestion into the dispatch procedures.

Registration of Participants

The National Electricity Rules define six categories of participants in the NEM and the procedures by which they achieve registered participant status. Registered participants include parties that participate directly in market operations and parties that provide services essential to the operation of the market.

Table 1 Registered Participants

Market Participants

Market Generators

Sell entire electricity output through the spot market and receive the spot price at settlement. Scheduled: aggregate generation capacity of more than 30 megawatts. Non-scheduled: aggregate generation capacity of less than 30 megawatts, or specifically classified as non-scheduled due to intermittent nature of generation (for example wind generator).

Market Network Service Providers

Own and operate a network linked to the national grid at two terminals in different NEM regions. Pay market participant fees and obtain revenue from trading in the NEM.

Market Customers

Purchase electricity supplied to a connection point on a NEM transmission or distribution system for the spot price. Electricity Retailers: buy electricity at spot price and on-sell it to end-use customers. End-use Customers: buy directly from the market for own use.

Other Registered Participants • Transmission Network Service Provider • Distribution Network Service Provider Owner and operator of the high-voltage transmission Owner and operator of substations and the wires towers and wires that transport electricity. that transport from distribution centres to end- • Special Participant use consumers. Also provider of technical services, System operators or agents appointed to perform including construction of power lines, inspection power security functions. Distribution system of equipment, maintenance and street lighting. operators and controllers or operators of any • Trader portion of the distribution system. Party registered to participate in the settlement • Intending Participant residue auction. Must reasonably satisfy NEMMCO of intention to perform activity that would entitle it to be a registered participant.

 Registration categories are generator, customer, market participant, network service provider, special participant and trader. There are sub-categories within a number of these categories, with distinctions being most commonly associated with specific functions of the participants in the market. The National Electricity Rules require participants involved in more than one type of activity – for example, a retailer who also owns, operates or controls a generating plant – to register as both a generator and a market customer.

Generators

Because the NEM operates as a gross pool, all generators are required to be registered and to conduct trade using the arrangements of the pool. A generator may comprise a number of generating units that are owned, operated or controlled by a particular party. The aggregate output of a generator is used to determine the appropriate registration category for that generator in the NEM.

Registration as a generator requires that the party satisfy NEMMCO that the generating units and the connection points for those generating units comply with the relevant technical requirements prescribed by the National Electricity Rules. Eligibility criteria applied to registered generators include a requirement to classify each of the generating units as either a ‘scheduled’ generator or a ‘non-scheduled’ generator. Each generating unit must also be classified as either a ‘market’ generating unit or a ‘non-market’ generating unit, and may additionally be classified as an ‘ancillary services’ generating unit.

Table 2 Characteristics of Generators

Characteristic Type Gas and Coal- Gas Water Renewable fired Boilers Turbine (Hydro) (Wind/Solar)

Time to fire-up 8–48 hours 20 minutes 1 minute dependent generator from cold on prevailing weather

Degree of operator control over energy source high high medium low

Use of non- renewable resources high high nil nil

Production of greenhouse gases high medium-high nil nil

Other characteristics medium-low medium-high low fuel cost suitable for operating cost operating cost with plentiful remote and water supply; stand-alone production applications; severely affected batteries may by drought be used to store power

 Section 2

Scheduled and Non-scheduled Generators

Any registered generator with the capacity to supply an aggregate quantity of at least 30 megawatts to a connection point on the transmission network is classified as a ‘scheduled’ generator. A scheduled generator must have its entire output scheduled as part of NEMMCO’s dispatch process. Scheduled generators are required to notify NEMMCO of the availability of each of their generating units for each trading interval according to a prescribed timetable, and must also have adequate communications facilities to support the issuing of dispatch instructions and the audit of responses.

A ‘non-scheduled’ generator has an aggregate capacity of less than 30 megawatts and its output is not scheduled in NEMMCO’s coordinated dispatch process. Non-scheduled generators can arrange, under certain circumstances, to have their output contracted to a market customer, and conduct this trade through the distribution network only. Some non-scheduled generators, including wind-powered generators, produce intermittent electricity output.

Market and Non-market Generators

Generators that sell all of the electricity they produce through the spot market are registered as ‘market’ generators. Market generators are paid the spot price applicable at their network connection for each trading interval during which they supply electricity to the market.

A generating unit that sells its entire output to either a local retailer or a customer located at the same connection point on the distribution network is classified as a ‘non-market’ generating unit. Such a generator does participate in the coordinated dispatch process managed by NEMMCO. Under typical circumstances, a non-market generator is paid by the counterparty with which it conducts trade.

Market Network Service Providers

Market network service providers own and operate a network (of poles, wires and associated equipment) that is linked to the transmission network at two terminals in different NEM regions. Market network service providers are also known as unregulated interconnectors. They must have a capacity of at least 30 megawatts and participate in NEMMCO’s centrally coordinated dispatch process. Unregulated interconnectors obtain revenue by trading in the NEM between regions where the difference in the spot price is significant enough to provide them with a revenue stream.

At present, the only market network service provider operating in the NEM is Directlink, which operates between the Queensland and New South Wales regions. Basslink, a seabed interconnector that will link Tasmania to the Australian mainland network in Victoria, will also operate as a market network service provider when it is commissioned in 2006.

Scheduled Loads

Some pumping stations associated with hydro generation bid into the market in the same way as generators, and are dispatched according to the schedule NEMMCO’s systems develop. In this way the pumping stations recycle the water to drive their turbines at the most cost- effective times. When they have readied their plant to generate electricity driven by the returned water supply they are able to submit offers to generate electricity for the pool.

 Monitoring Demand

Although the level of electricity demand varies dynamically, there is a predictable pattern of demand that reflects cycles of activity in industry and commerce on specific days of the week. There is also a pattern of typical seasonal variation in demand, including periods of peak demand that are expected to occur on days of extreme temperature. Both the generators and the networks must have the flexibility to meet this variability of demand, and in the case of generators particularly, must also satisfy the commercial imperatives of the owners and operators of the electricity supply infrastructure.

Demand (sometimes also referred to as load) is aggregated by NEMMCO’s systems and the aggregate level of demand in each region is monitored and adjusted as often as every four seconds so that generation levels can be precisely controlled. The level of a market customer’s demand varies continuously and automatic generation systems finetune generation levels and control frequency to maintain power system stability and security.

Forecasting Supply Capacity

Scheduled generators are required to inform NEMMCO of their available capacity and their intended production levels for each trading interval of each trading day according to NEMMCO’s forecasting timetables. NEMMCO uses the submitted information to produce a forecast referred to as a projected assessment of system adequacy for seven days ahead, and another projected assessment of system adequacy for two years ahead. The seven-day forecast is updated every two hours, and the two-year forecast is updated weekly.

The information from the projected assessment of supply adequacy forecasts assists NEMMCO to manage meeting the reliability standard required of the market operator at all times. It is also a valuable reference for registered participants as a guide for the scheduling of routine plant maintenance.

Participation in Central Dispatch

The central dispatch process matches supply and demand in the most cost-effective way and also protects power system security. Generators, market network service providers and scheduled loads bid into NEMMCO’s central dispatch processes when they are appropriately registered and have the required communications facilities in place.

Central dispatch results in the setting of dispatch prices and frequency control ancillary services prices for each dispatch interval, and the spot prices for each trading interval. Dispatch instructions are generally issued electronically. Market participants must ensure they have facilities to receive dispatch instructions, which NEMMCO issues progressively at intervals of not more than five minutes.

Market participants are required to advise NEMMCO of any abnormal conditions that will render them either inflexible or unable to operate in accordance with dispatch instructions during any trading interval.

 Section 2

Bidding

The bids market participants submit to the market are based on production costs and the financial hedging positions they hold with counterparties. Market participants use hedge contracts and other financial instruments widely to manage the risks associated with trading in a spot market where prices per megawatt hour are typically less than $40, but may vary from $0 to $10,000.

Two days ahead of each trading day, scheduled generators are required to provide details of their megawatt availability for each of the 48 trading intervals in the trading day. Their submissions are in the form of an offer to produce particular quantities of megawatts at particular prices throughout the day. The submitted information indicates the times the generator wishes to start up and connect to the network, and the time of any planned disconnection from the network.

The bids include information about the generator’s minimum operating (or self-dispatch) level. The minimum operating level is indicated by the point where the bid price changes from a negative to a positive price band, and is the level at which the generator can operate indefinitely without requiring auxiliary firing to respond to changed dispatch instructions. The minimum operating level is an important consideration for generators from a commercial point of view as auxiliary firing typically requires higher-quality and more expensive fuels.

Scheduled generators must submit the required information according to NEMMCO’s timetable for each dispatch interval. The bids indicate how many megawatts the generator wishes to produce at particular prices in up to 10 price bands of increasing price from Band 1 to Band 10. Each band represents an incremental amount of generation. The megawatt quantities, in whole megawatts, apply at the generator’s specified connection point to the network.

Figure 2 Bid Structure

125MW @ $120/MW $120

100 75MW @ $90/MW 80 100MW @ 60 Minimum operating level $55/MW

40 200MW @ $25/MW

Price per Megawatt per Price 20 Band 2 Band 3 Band 4 Band 5 0 Band 1 100 200 300 400 500 600 –20 Megawatt Output 100MW @ –40 –$20/MW

A simplified representation of bids from a 600 MW generating unit that indicates the capacity the generator is willing to offer to the NEM at a range of prices.

Note: A generator may bid up to ten bonds for each dispatch interval.

10 The information the scheduled generators submit to NEMMCO in this process essentially forms their bids to produce electricity for the pool. This information is fed into NEMMCO’s market management and energy management systems to determine a generation schedule. NEMMCO’s systems organise all bids for each dispatch interval into a price stack which is used as the basis for dispatching generators to provide the least-cost solution to satisfy prevailing demand in the NEM.

Under National Electricity Rules, if the bids of scheduled generating units or scheduled loads for a particular trading interval result in identical prices at the regional reference node, then the megawatt quantities specified in the relevant price bands of those dispatch bids must be dispatched on a pro-rata basis where this can be achieved without imposing undue costs on any party or violating any constraints.

Pre-dispatch

Each day NEMMCO prepares and publishes a pre-dispatch schedule that covers supply and projected demand for all periods from the next trading interval to the final trading interval of the next trading day.

NEMMCO’s systems issue dispatch instructions every five minutes after a set of rules (referred to as the dispatch algorithm) is applied to all dispatch bids to determine the most cost-effective way to satisfy demand. This calculation takes into account any loss factors to be applied, the technical limitations of the system, and any bottlenecks or physical constraints that exist.

NEMMCO uses confidential electronic means to provide scheduled generators with details about the level of dispatch for each of its generating units.

A scheduled generator may vary its dispatch bid and electronically re-bid to vary the quantity of electricity it will produce within any of the fixed price bands set in the pre-dispatch schedule. At the time of making any bid, the generator must have a genuine intention to honour the bid. Right up to the time of dispatch a generator may re-bid if the material conditions or circumstances upon which the original bid was based change. The re-bidding of the value for any price band is not permitted.

Scheduled generators must ensure they are able to dispatch electricity as required under the pre-dispatch schedule, and must use the re-bidding process to notify NEMMCO of any changes they require to production schedules.

Scheduled loads are also able to bid into the market and have their demand factored into the dispatch algorithm calculation.

11 Section 2

Spot Price Determination

The central dispatch process determines the dispatch price to apply at each regional reference node for each five-minute dispatch interval. The spot price is calculated in two steps using the bids made by market participants. The dispatch price is typically the bid price of the most expensive generator required to be dispatched into production to meet demand. NEMMCO then calculates the spot price as a time-weighted average of the six dispatch prices in the half-hour trading interval at the regional reference node.

Network losses, network constraints, the availability of scheduled network services and network dispatch offers are all taken into account in determining which participants are dispatched. Consequently, all of these factors have an impact on dispatch prices, spot prices and ancillary services prices.

NEMMCO runs the dispatch algorithm for each dispatch interval to determine the dispatch price. The dispatch price at a regional reference node represents the marginal value of supply at that location and time, this being determined as the price of meeting an incremental change in load of one megawatt at that location and time.

A single regional reference price – the spot price at a regional reference node – provides the basis upon which trade in the NEM is conducted. The spot price applies to both sales and purchases of electricity at a particular location and time. The trading price at each transmission network connection is the spot price at the regional reference node for the region to which the connection point is assigned, multiplied by the intra-regional loss factor applicable to that connection point.

Scheduling

NEMMCO’s market management systems include software applications that collate information about generators’ bids and produce a bid stack, which it then uses as the basis for dispatching the market. Creation of the bid stack involves electronically organising the offers of generators to supply capacity to the market in rising-price order. If the power system was completely unconstrained, generators would be scheduled and dispatched into production based solely on the price of their offers to generate in order to provide the most cost-effective supply.

NEMMCO’s market management systems devise solutions to any constraints to the free flow of electricity in the system, and factor these into the scheduling process. In this way, they ensure that the required amount of electricity is generated, and also that the system has the physical and technical capacity to convey the electricity to those parts of the network where consumers require it.

12 The business processes supported by NEMMCO’s dispatching technology include receipt and processing of dispatch bids and offers for the centralised dispatch process, management of the centralised dispatch process to balance electricity supply and demand, and determination of spot prices for the wholesale electricity market. NEMMCO must hold and process the market information concerning bids and dispatch securely because its commercially sensitive nature.

Figure 3 Scheduling NEM Generators 500

E $38 D 400 F C B $37

300 A $35

200 $28

100

$20 Total demand of electricity from the pool (MW) pool the from electricity of demand Total 0 4:05 4:10 4:15 4:20 4:25 4:30 5-minute periods throughout a half-hour trading period

Generator 1 Generator 2 Generator 3 Generator 4 Generator 5

Bids to produce electricity received by NEMMCO are stacked in ascending price order for each dispatch period. Generators are then progressively scheduled into production to meet prevailing demand starting with the least-cost generation option. A. In order to supply demand for power at 4:05 pm, Generators 1 and 2 are dispatched to their full bid capacity, and Generator 3 is only partly dispatched. The price is $35 per MWh. B. At ­:10 pm, demand has increased: Generators 1, 2 and 3 are fully dispatched, and Generator 4 is partly dispatched. The price is $37 per MWh. C. At 4:15 pm, demand has increased a further 30 MW. Generators 1, 2, 3 and 4 continue producing power and the price remains at $37 per MWh. D. By 4:20 pm, demand has increased to the point that Generator 5 is just required to meet demand, and the price increases to $38 per MWh. E. At 4:25 pm, Generators 1–4 are fully dispatched and Generator 5 partly dispatched. The price remains at $38 per MWh. F. By 4:30 pm, demand has fallen. Generator 5 (the most expensive generator) is no longer required, and Generator 4 is only partly dispatched. The price returns to $37 per MWh. The spot price for the trading period is calculated as the average of the six dispatch prices. That is, $(35+37+37+38+38+37) per MWh divided by six, or $37 per MWh. This is the price all generators receive for production during this period, and the price market customers pay for electricity they consume from the pool during this period.

13 Section 2

Dispatch

NEMMCO’s systems send electronic instructions to inform generators of the production schedule they are required to follow. These instructions are issued for every five-minute dispatch interval of every day, and are based on delivering the precise amount of electricity required to satisfy prevailing demand in the most cost-efficient way. Dispatch instructions take into account any physical and technical constraints that exist in the network. In this way, dispatch is a repetitive process based on dynamic forecasting that is adjusted as often as every four seconds as sensitive monitoring equipment determines micro-variations in demand.

Generators are obliged to produce electricity strictly according to the dispatch instructions issued by NEMMCO. When short-term movements in demand mean that the output of one or more generators must be adjusted to maintain system balance, ancillary services are implemented to achieve the required increase or decrease in output by means of the dynamic contact that generators have with NEMMCO’s control centres.

Figure 4 The Generator Dispatch Cycle

Scheduling • Ranking bids • Identifying the dispatch Data input levels of generating units • Establishing current operational status of generating units • Assessing demand forecasts • Applying loss factors • Determining system conditions

Dispatch • Issuing dispatch instructions to generators

Failure to Follow Dispatch Instructions

When a market participant fails to produce its dispatched output within the required time and accuracy parameters, NEMMCO declares the market participant to be non-conforming. NEMMCO requires such a market participant to rectify the situation promptly, and does not factor the originally submitted bid into the spot price determination during the period of non-conformity.

Where a generator fails to comply with dispatch instructions in this way or where there is a security or reliability need, NEMMCO may modify or override the dispatch algorithm outcome.

14 Section 3

Operating the Ancillary Services Markets

Ancillary Services

To ensure that the power system is operated according to technical standards, NEMMCO engages a range of ancillary or supplementary services. These services control frequency deviations from the standard, control the voltage and power flow at different points of the network, and re-start the entire system in the event of a complete shut-down.

The services involved with frequency control are procured through eight separate markets where service providers bid in their availability to provide specific services and are dispatched to do so based on prevailing need during each electricity dispatch interval in the energy market.

An ancillary service dispatch price for a region is the sum of the marginal price of meeting any overall market ancillary service requirement for that service, plus the marginal price of meeting each local market ancillary service requirement for that service.

NEMMCO’s systems calculate a dispatch price for each market ancillary service at each regional reference node for every dispatch interval, and using the same process as for the energy market, determine a spot price for each trading interval for each service for each region. In this way, the cost of any ancillary service will always be between $0 and $10,000 per megawatt hour.

Ancillary Services Generators

If a market generator nominates to bid the generating capacity of a generating unit to provide market ancillary services, that unit may be classified as an ‘ancillary services’ generating unit. NEMMCO is further able to register that unit in respect of a specific ancillary service. The generating unit may then submit market ancillary services offers in accordance with the National Electricity Rules.

Generators wishing to participate in the markets for ancillary services are required to be registered as ancillary services generators. They must bid their services into the ancillary services market for the dispatch intervals for which they wish to supply ancillary services to the market.

Each time the dispatch algorithm is run by NEMMCO, it must determine an ancillary service price for each market ancillary service for each regional reference node which is to apply until the next time the dispatch algorithm is run.

15 Section 3

Frequency Control Ancillary Services

When electricity generation balances demand, the power system is stable and optimum frequency is maintained. However, when demand exceeds generation, frequency decreases and when generation exceeds demand, frequency increases. Deviations in frequency occur due to moment-by-moment changes in demand and generation that are too instantaneous to be captured by NEMMCO’s sophisticated forecasting processes. Frequency control ancillary services include a number of processes by which frequency is maintained according to agreed frequency standards in that they dynamically finetune supply in relation to prevailing demand.

Frequency control ancillary services can be categorised as regulation services or contingency services. Regulation frequency control services correct the supply and demand balance in response to minor deviations in demand or generation, and comprise regulation raise and regulation lower services. These services are required dynamically and their delivery is centrally controlled by NEMMCO.

Regulation frequency control services are provided by generators equipped with Automatic Generation Control, a system that allows NEMMCO to continually monitor system frequency and send control signals out to generators to ensure frequency is maintained between 49.9 Hertz and 50.1 Hertz. These control signals alter the megawatt output of the generator and restore the balance between demand and supply.

Contingency frequency control, on the other hand, refers to the correction of the supply and demand balance following a major event such as the failure of a generating unit or transmission line.

The National Electricity Rules require NEMMCO to manage any deviation in frequency following a single contingency event, and to return the system to normal operating band within five minutes of the event.

Contingency frequency control services are controlled by either the generator or the network service provider involved. They are only used occasionally. They include fast raise and fast lower (six-second response), slow raise and slow lower (60-second response), and delayed raise and delayed lower (five-minute response).

16 NEMMCO’s dispatch engine must enable sufficient of each of the eight frequency control ancillary services products from the bids submitted to meet the aggregate frequency control ancillary service requirement. The marginal price for the frequency control ancillary service category is set by the highest-cost generation offer to be dispatched into production. All providers of that particular service for that particular dispatch interval are paid the half-hourly average marginal price, the ancillary service spot price, for a trading interval.

During periods of high or low demand, NEMMCO’s dispatch engine may change the energy target of a scheduled generator or market customer to minimise the total cost of energy plus frequency control ancillary services to the market. This occurs through an automated process that is referred to as co-optimisation.

Other Ancillary Services

NEMMCO purchases network control ancillary services under contracts with service providers. These services are either for voltage control or network loading control. Voltage control involves generators either absorbing or generating reactive power from or onto the electricity grid. Network loading services control the flow of electricity in the network by altering generation levels at different parts of the network.

NEMMCO also contracts for system re-start ancillary services which may be required to re-start the power system after a complete or partial shutdown. System re-start can be achieved using a generator that can start up and supply energy to the transmission grid without any external source of supply. Other generators with the capability of detecting a system failure and withdrawing to internal generation until NEMMCO is able to use them to re-start the power system may also be used.

Table 3 Frequency Control Ancillary Services Markets

Type Action Costs Recovered From

Regulation Raise frequency Causer pays

Lower frequency Causer pays

Contingency Fast (6 second) raise frequency Generators

Fast (6 second) lower frequency Market customers

Fast (60 second) raise frequency Generators

Fast (60 second) lower frequency Market customers

Fast (5 minute) raise frequency Generators

Fast (5 minute) lower frequency Market customers

17 Section 4

Interaction Between the Market and the Power System

Because operation of the NEM and the physical power system are intrinsically linked, any decision taken in relation to management of the power system has implications for market outcomes. NEMMCO is responsible for both the market and the system and for managing the interaction between them. As well as delivering the most cost-effective electricity supply, NEMMCO must ensure that the power system is secure and reliable and that adequate planning is undertaken to ensure its long-term operation.

Elements in the power system include generator connection points, transmission systems and structures, distribution networks and structures, transformers, terminal stations, sub-stations and switchyard equipment. NEMMCO only has responsibility for the operation of the transmission systems.

All elements of the power system must be operated in an integrated manner and according to specific technical and operational standards and procedures.

Access to Transmission and Distribution Networks

Under National Electricity Rules open access arrangements exist in relation to the transmission system and associated network services. This means that any party that satisfies eligibility criteria for participation in the NEM may conduct trade through power system infrastructure.

Network service providers and registered participants enter commercial agreements about the terms and conditions of their connection to a network and the provision of network services. The technical terms and conditions of connection to the network are prescribed in the National Electricity Rules, which require NEMMCO to ensure the power system operates securely and reliably and in accordance with power system operational standards at all times.

Technical Operating Limits and Standards

Each element in the power system is designed to carry a certain maximum amount of electrical current, and is fitted with protection mechanisms to avoid damage if an excess of current passes through them. An example of a protective mechanism is the fuse wire in a residential electricity connection that burns out or a circuit breaker that closes during a power surge incident, cutting off the current and therefore protecting the household wiring, and ensuring the safety of people and property.

Technical limits may exist in relation to all individual elements on the system as well as the system as a whole. NEMMCO must factor the technical limits of the elements into the scheduling and dispatch of generators and networks to keep the whole interconnected system secure.

In addition to the importance of physical elements of the system operating within technical limits, delivery standards apply to electricity supply. The standard voltage in Australia is fixed at 240 volts (of electrical pressure) and frequency (or cycles per second in the waveform) at 50 Hertz.

18 Reliable Operating State

A reliable operating state of the power system is achieved when the power system is operating according to the required technical standards, and can continue to meet demand for electricity in the event of a credible contingency.

Secure Operating State

The power system is in a secure operating state if it is operating according to the required technical standards, and continues to do so after a credible contingency. The speed of a generator, or operational frequency, is a crucial requirement for security. Frequency must not fall below 49.0 Hertz at any time, and must return to 49.5 Hertz within 60 seconds of any disruption, and to within the satisfactory operating tolerance band of 49.9 to 50.1 Hertz within five minutes of any disruption.

If disruptive events that threaten system security are of a transient nature, ancillary services are implemented to restore the system to balance. During more long-term contingencies, NEMMCO may issue instructions requiring that parts of the system be disconnected or dispatch additional generation so that reliability and security of the entire system can be maintained.

Credible Contingency

A credible contingency is an event that the system operator considers has a probability of occurring that is sufficiently large that the system should be operated to withstand it and be capable of being promptly returned to a satisfactory operating state following it. Examples of credible contingencies include an unplanned disconnection of a generating unit or the unplanned disconnection of a major item of transmission network equipment.

Non-credible Contingency

An event is defined as a non-credible contingency when the system operator believes the probability of that event occurring is not sufficiently large that the system should be operated to withstand it and be capable of being promptly returned to a satisfactory operating state. Examples of non-credible contingencies include the failure of multiple generating units or the collapse of a transmission tower.

Other situations that pose added risks to the power system include extreme weather conditions, bushfires and equipment dysfunction. During a period of unusual conditions, the system operator may reclassify a non-credible contingency as a credible contingency.

19 Section 4

Issues that Impact on Price

The cost of supplying electricity to different connection points on the network varies because of energy losses during transmission, and the physical and technical constraints of the power system.

Energy Losses

Energy is lost as electricity is transported from where it is produced to where it is consumed through both electrical resistance and the heating up of conductors during transportation. Losses become significant when electricity is transported over long distances on high voltage transmission lines, and may be equivalent to 10 per cent of the total electricity conveyed. Consequently, NEMMCO must factor the certainty that losses will occur into account in the processes by which it manages the market. In practical terms, this means that up to 10 per cent more electricity must be generated than that indicated in demand forecasts in order to allow for the loss during transportation.

The impact of network losses on spot prices is mathematically represented as transmission and distribution loss factors. Loss factors account for the difference between the sent-out price and the price that market customers pay for electricity. Intra-regional loss factors apply as electricity is conveyed from the regional reference node to the consumer’s connection point. NEMMCO determines the intra-regional loss factors and applies them to each regional spot price to calculate the price of individual supply on an annual basis. Inter-regional loss factors that apply on the transmission system are calculated dynamically through the dispatch process and factored into the cost of supply.

Figure 5 Loss of Energy in the Power System

REGION BOUNDARY

CUSTOMER 2

REGION A REGION B REGION A REFERENCE REFERENCE REGION B NODE NODE

CUSTOMER 1

Inter-regional Loss Factor Applies Intra-regional Loss Factor Applies

Electricity losses occur between regions and within regions. Losses between regions are of the order of 10 per cent of electricity transported. Therefore, to ensure that 100 MW of energy committed to be supplied to Region B (in the diagram) from generators within Region A, 110 MW of electricity must be exported from Region A. Intra-regional losses occur between the region reference node, where the region spot price is set, and the customer’s connection point to the network. In the diagram, customer C1 would require more energy to be imported to receive the same amount of supply as customer C2, because C2 is closer to the regional reference node.

20 Constraints

The term constraint is used in electricity supply to describe a physical or technical limit of either a single element of the power system (such as the transfer capacity of a particular conductor) or the maximum operating capacity of a section of the system (such as interconnector capacity). These physical and technical limits cannot be exceeded because to do so would compromise the security or reliability of the wider system.

Physical and technical limits on some elements the power system may lead to congestion and the requirement for alternative approaches to scheduling to facilitate the delivery of electricity where it is required by consumers.

When there are no constraints in a power system, the network permits the flow of power along the path of least resistance. In these circumstances, NEMMCO’s systems dispatch generators purely on the basis of the most economic schedule. In reality, technical limitations on the network result in the most economic dispatch outcome being manipulated. When NEMMCO invokes a constraint prohibiting use of a particular flow path in order to keep the power system secure, the normal dispatch order is modified.

Details about all physical and technical constraints in the power system are entered into NEMMCO’s systems by operators in NEMMCO’s control centres. Because some capacity constraints remain constant, procedures to manage them are formulated into constraint equations that determine alternative paths to facilitate supply to a particular point on the power system.

NEMMCO currently relies on the manual intervention of NEMMCO’s operators to manage constraints during the dispatch process. NEMMCO has plans to automate constraint management into the functionality of its energy and market management systems in the future.

Inter-regional constraints have an impact on the price differences between regions, and intra-regional constraints affect the dispatch order within a region, and therefore the regional spot price.

21 Section 5

NEMMCO’s Intervention in the Dispatch Process

Market forces generally ensure that supply and demand are balanced in the NEM. However, in maintaining power system security, NEMMCO has the power to intervene in the dispatch process by taking certain actions that override the automated processes of NEMMCO’s systems and consequently impact on dispatch and price outcomes in the market.

As market and system operator, NEMMCO may use a variety of approaches to manage security and reliability. These approaches include intervening in the market by taking a number of actions that override or supplement the automated processes of NEMMCO’s market management and energy management systems.

NEMMCO may issue directions to generators requiring them to provide more electricity than they have bid into the market, enter reserve trading agreements (where supply is purchased on contract from sources not included in NEMMCO’s normal forecasting processes to ensure that the required levels of reserve in the system are maintained), or implement load shedding (where NEMMCO, as a last resort, instructs network service providers to disconnect customers for a limited period to avoid a supply shortfall compromising the power system’s security).

Issuing Directions

NEMMCO may issue a power system security direction requiring a generator to generate against its bid in order to maintain a secure operating state. NEMMCO also has the authority to direct a non-market generator into production to both protect power system security or satisfy the supply reliability standard.

NEMMCO’s intervention in this way affects the dispatch and price outcomes, and those participants involved receive separate financial compensation as a result of having been directed to operate according to NEMMCO’s instructions.

Reserve Trading

In consultation with persons nominated by the relevant jurisdictions, NEMMCO may enter into reserve contracts for the provision of reserve services to ensure that the reliability of supply in a region meets the reliability standard established by the Reliability Panel. NEMMCO must publish a notice of its intention to commence contract negotiations for the provision of reserve capacity to meet minimum reserves standard requirements. The National Electricity Rules refer to this process as the Reliability Safety Net.

When contracting for the provision of reserves, NEMMCO must give first priority to facilities which, if called on, would result in the least distortion of the spot price outcomes if market intervention was not required.

22 Load Shedding

When demand in the NEM exceeds supply capability and all other means to meet the supply shortfall have been exhausted, NEMMCO may instruct network service providers to disconnect some customers in order to reduce demand and return the system to balance. This process – called load shedding – results in supply being temporarily cut off from sections of the network (and consequent blackouts being experienced by end-users) until the market adjusts and the supply shortfall no longer continues. In the event of load shedding, the spot price is automatically set at VoLL. NEMMCO is required to ensure price outcomes are returned to normal levels as soon as is possible and that normal supply arrangements are resumed.

Pricing in Extreme Conditions

The National Electricity Rules describe processes for the management of the market when there is insufficient supply capacity to satisfy demand. Legislation in each of the States empowers jurisdictions to intervene and declare periods of mandatory restrictions. During periods of mandatory restrictions, NEMMCO maintains the pricing signals that would have occurred had the restrictions not been imposed. The process involves NEMMCO seeking offers from generators and market network service providers to withdraw some or all of their capacity from the market. These participants are then compensated for the withdrawn capacity. NEMMCO accepts capacity withdrawal offers only to the extent of the forecast reduction in demand that will occur due to the restrictions.

NEMMCO prepares a mandatory restrictions schedule that identifies the capacity to be acquired from the generators and market network service providers for each trading interval for the next trading day equivalent to the reduced demand that results from the restrictions being in force. This means where a supply shortfall is anticipated and a jurisdiction invokes mandatory restrictions, NEMMCO seeks and accepts mandatory restriction offers from those generators or market network service providers who offer to withdraw their capacity at the lowest price. These generators or market network service providers are paid the offer price regardless of whether or not they were called upon to generate that capacity. The market price cap ($10,000 per megawatt hour) applies to both the energy market and the mandatory restriction schedule suppliers for any period that load shedding would have been implemented if restrictions had not applied.

23 Section 6

Principal Power Stations, and Interconnectors

The following tables provide details about the principal power stations that generate the electricity traded in the NEM. The tables must be read as a ‘snapshot in time’, and on the understanding that some smaller capacity generating units that trade actively in the NEM may not appear within them.

Table 4 Queensland

Power Station Registered Generator Locality Capacity Main Energy (MW) Source

Barcaldine Queensland Power Trading Corporation Barcaldine 57 gas

Barron Gorge Stanwell Corporation Limited Cairns 60 water

Callide Callide Power Trading Pty Ltd Ipswich 840 black coal

Callide A CS Energy Limited Ipswich 120 black coal

Callide B CS Energy Limited Ipswich 700 black coal

Collinsville Queensland Power Trading Corporation Collinsville 180 black coal

Gladstone Queensland Power Trading Corporation Gladstone 1680 black coal

Kareeya Stanwell Corporation Limited Tully 79 water

Mackay Stanwell Corporation Limited Mackay 34 oil

Middle Ridge CS Energy Limited Sth Queensland 56 oil

Millmerran Millmerran Energy Trader Pty Ltd Millmerran 856 black coal

Mt Stuart Queensland Power Trading Corporation Townsville 304 oil

Oakey Queensland Power Trading Corporation Darling Downs 282 gas

Roma Origin Energy Electricity Limited Roma 80 gas

Stanwell Stanwell Corporation Limited Rockhampton 1400 black coal

Swanbank A CS Energy Limited Ipswich 408 black coal

Swanbank B CS Energy Limited Ipswich 500 black coal

Swanbank C CS Energy Limited Ipswich 26 oil

Swanbank D CS Energy Limited Ipswich 37 oil

Tarong Tarong Energy Corporation Ltd Nanango 1415 black coal, gas

Wivenhoe Tarong Energy Corporation Ltd Fernvale 500 water

Yabulu Queensland Power Trading Corporation Townsville 160 oil

24 Table 5 New South Wales

Power Station Registered Generator Locality Capacity Main Energy (MW) Source

Blowering Snowy Hydro Trading Pty Limited Tumut 80 water

Mt Piper Delta Electricity Lithgow 1320 black coal

Vales Point Delta Electricity Newcastle 1320 black coal

Wallerawang C Delta Electricity Lithgow 1000 black coal

Munmorah Delta Electricity Newcastle 600 black coal

Bayswater Macquarie Generation Muswellbrook 2640 black coal

Hunter Valley Macquarie Generation Muswellbrook 50 gas

Liddell Macquarie Generation Muswellbrook 2000 black coal

Broken Hill Eraring Energy Broken Hill 50 gas

Eraring Eraring Energy Newcastle 2640 black coal

Hume Eraring Energy Albury 50 water

Kangaroo Valley Eraring Energy Nowra 160 water

Bendeela Eraring Energy Nowra 80 water

Redbank Redbank Project Pty Ltd Singleton 150 black coal

Smithfield Sithe Australia Power Services Pty Ltd Smithfield 176 gas

Warragamba Eraring Energy Warragamba 50 water

Table 6 Snowy

Power Station Registered Generator Locality Capacity Main Energy (MW) Source

Guthega Snowy Hydro Trading Pty Limited Jindabyne 60 water

Murray 1 Snowy Hydro Trading Pty Limited Khancoban 950 water

Murray 2 Snowy Hydro Trading Pty Limited Khancoban 550 water

Tumut 1 Snowy Hydro Trading Pty Limited Cabramurra 330 water

Tumut 2 Snowy Hydro Trading Pty Limited Cabramurra 288 water

Tumut 3 Snowy Hydro Trading Pty Limited Talbingo 1500 water

25 Section 6

Table 7 Victoria

Power Station Registered Generator Locality Capacity Main Energy (MW) Source

Anglesea State Electricity Commission of Victoria Anglesea 150 brown coal

Bairnsdale Duke Energy Bairnsdale Operations Pty Ltd Bairnsdale 80 gas

Dartmouth Southern Hydro Partnership Dartmouth 150 water

Eildon Southern Hydro Partnership Eildon 120 water

Hazelwood Hazelwood Power Morwell 1600 brown coal

Jeeralang A AES Transpower Holding Pty Ltd Morwell 226 gas

Jeeralang B AES Transpower Holding Pty Ltd Morwell 239 gas

Loy Yang A Loy Yang Power Management Ltd Traralgon 2000 brown coal

Loy Yang B Edison Mission Energy Australia Ltd Traralgon 1000 brown coal

McKay Power Southern Hydro Partnership Mt Beauty 90 water

Morwell Energy Brix Australia Corporation Pty Ltd Morwell 195 brown coal

Newport AES Transpower Holding Pty Ltd Newport 500 gas

Somerton AGL Electricity Limited Somerton 160 gas

Valley Power Valley Power Pty Ltd Traralgon 300 gas

West Kiewa Southern Hydro Partnership Mt Beauty 64 water

Yallourn W Yallourn Energy Pty Ltd Moe 1450 brown coal

26 Table 8 Tasmania

Power Station Registered Generator Locality Capacity Main Energy (MW) Source

Bastyan Hydro–Electric Corporation Pieman River 80 water

Bell Bay Bell Bay Power Pty Ltd Bell Bay 240 gas

Catagunya/Liapootah/Wayatuinah Hydro–Electric Corporation Central 170 water

Cethana Hydro–Electric Corporation Forth River 85 water

Devils Gate Hydro–Electric Corporation Forth River 60 water

Fisher Hydro–Electric Corporation Fisher River 43 water

Gordon Hydro–Electric Corporation Gordon River 432 water

John Butters Hydro–Electric Corporation King River 144 water

Lemonthyme/Wilmot Hydro–Electric Corporation Forth River 82 water

Mackintosh Hydro–Electric Corporation Murchison River 80 water

Meadowbank Hydro–Electric Corporation Lower Derwent 40 water

Paloona Hydro–Electric Corporation Forth River 28 water

Poatina Hydro–Electric Corporation Central 100 water

Reece Hydro–Electric Corporation Pieman River 232 water

Repulse Hydro–Electric Corporation Lower Derwent 28 water

Tarraleah Hydro–Electric Corporation Central 90 water

Trevallyn Hydro–Electric Corporation Launceston 80 water

Tribute Hydro–Electric Corporation Anthony River 83 water

Tungatinah Hydro–Electric Corporation Central 125 water

Woolnorth Wind Farm Hydro–Electric Corporation NE Tasmania 65 wind

27 Section 6

Table 9 South Australia

Power Station Registered Generator Locality Capacity Main Energy (MW) Source

Dry Creek Synergen Power Pty Ltd Dry Creek 156 gas

Hallett AGL Electricity Limited Hallett 220 gas

Ladbroke Grove Origin Energy Electricity Limited Penola 80 gas

Mintaro Synergen Power Pty Ltd Mintaro 90 gas

Northern NRG Flinders Operating Services Pty Ltd Port Augusta 530 brown coal

Osborne NRG Flinders Operating Services Pty Ltd Adelaide 180 gas

Pelican Point Pelican Point Power Limited Adelaide 478 gas

Playford B NRG Flinders Operating Services Pty Ltd Port Augusta 240 brown coal

Port Lincoln Synergen Power Pty Ltd Port Lincoln 50 gas

Quarantine Origin Energy Electricity Limited Adelaide 96 gas

Snuggery Synergen Power Pty Ltd Snuggery 63 gas

Torrens Island A TRUenergy (SA) Generation Pty Ltd Port Adelaide 480 gas

Torrens Island B TRUenergy (SA) Generation Pty Ltd Port Adelaide 800 gas

Table 10 Interconnectors

Interconnector Regions Maximum Transfer Capacity (MW)*

QNI Queensland to New South Wales 1080 New South Wales to Queensland 300

Directlink Queensland to New South Wales 180 New South Wales to Queensland 80

SNO–NSW Snowy to New South Wales 3000

SNO–VIC Snowy to Victoria 1900

VIC–SA Victoria to South Australia 460 South Australia to Victoria 300

Murraylink Victoria to South Australia 220 South Australia to Victoria 150

Basslink Tasmania to Victoria 600 Victoria to Tasmania 480

*Actual transfer capacity at any time depends on network conditions, demand levels and plant in service

28 Index

A M ancillary services, 15, 17 mandatory restrictions, 23 frequency control, 15, 16 market customers, 6 network control, 17 market management systems, 12, 22 system re-start, 15, 17 market network service providers (MNSPs), 6, 8 automatic generation control, 16 N B National Electricity Market bidding, 10 design, 4 C regions, 3 co-optimisation, 16 National Electricity Rules, 2, 6, 7, 16, 23 constraints, 12, 21 network, 4 contingency network service providers, 18, 23 credible, 18 distribution (DNSPs), 6 non-credible, 18 market (MNSPs), 6, 8 D transmission (TNSPs), 6 demand P monitoring, 7 power system, 2 dispatch reliability, 18, 19 instructions, 14 security, 18, 19 interval, 12 pre-dispatch intervention in, 22 schedule, 11 price, 4 principal power stations process, 2, 9, 13 New South Wales, 25 E Queensland, 24 electricity pool, 3, 6 Snowy region, 25 energy management systems, 22 South Australia, 27 energy-only market, 5 Tasmania, 28 Victoria, 26 F projected assessment of supply adequacy, 9 financial contracts, 5 forecasting, 9 R frequency, 15 re-bidding, 11, 15 regional reference node, 4, 12, 15 G registered participants, 6 generators, 6, 7, 8 reliability safety net (reserve trading), 22 ancillary services, 15 reliability standard, 9 market, 6 market/non-market, 8 S minimum operating level, 10 scheduled loads, 8 scheduled/non-scheduled, 6 scheduling, 13 gross pool/net pool, 5 sent-out energy, 5 spot market, 2 I price cap, 5 industry deregulation, 3 price determination, 13 inter-regional transfer, 2 spot price, 12 interconnection, 3 supply shortfall, 22 L T load shedding, 23 technical standards, 15, 18, 19 locational/nodal pricing, 5 trading interval, 4, 15 loss factors, 12, 20 V value of lost load (VoLL), 5 NEMMCO GPO Box 2008S Melbourne VIC 3001

WEBSITE www.nemmco.com.au INFORMATION CENTRE Australia’s National Electricity Market Telephone: 1300 361 011 Wholesale Market Operation