2019 – 2020ANNUAL REPORT Australian Energy Market Commission Level 15, 60 Castlereagh Street Sydney NSW 2000 30 September 2020 The Hon Dan van Holst Pellekaan MP Minister for Energy and Mining GPO Box 974 Adelaide SA 5001 Dear Minister I am pleased to present the Australian Energy Market Commission’s 2019-2020 annual report. This report is prepared in accordance with Section 27 of the Australian Energy Market Commission Establishment Act 2004 (SA). Merryn York ACTING CHAIR EXECUTIVE REPORT Contents 2 10 17 OVERVIEW STRATEGIC Executive report Strategic overview Our organisation Includes the performance summary, A strategic overview of our work in Who we are, what we do, our Chairman and Chief Executive’s the year under review focussing on leadership and how we work message and strategic overview the AEMC’s five priority work areas How energy markets are governed 3 Strategic overview 10 Our organisation 17 How we work 3 National energy objectives 20 Performance summary 4 Our mission, vision and values 21 OUR ORGANISATION Chair and Chief Executive Message 6 What we do 22 Managing rule making timeframes 25 Working with the Energy Security Board on market development 26 Organisation charts 29 Our stakeholders 39 Our people 42 Governance 44 50 86 122 REVIEWS AND RULES Rules and reviews Financial performance Statutory reports Index providing summaries of all Provides audited financial Under section 27 of the Australian work undertaken this year statements for the AEMC Energy Market Commission Establishment Regulations 2005 we must include specific reports which PERFORMANCE FINANCIAL are provided here together with a compliance index Compliance 146 STATUTORY REPORTS AEMC ANNUAL REPORT 2019-2020 — 1 Our vision for the Australian energy market is long term. AEMC priorities ensure the continuity of this vision while we work on ways to keep the system secure as new technologies are integrated into it. Above all we are transforming the market in ways that keep consumer costs as low as possible and maintaining the flexibility to navigate the ever-changing environment in which we operate. 48Rule requests completed 22 Reviews and advice completed 19Projects underway at 30 June 2020 2 — AEMC ANNUAL REPORT 2019-2020 How energy markets EXECUTIVE REPORT are governed Federal, state and territory ESB energy ministers Energy Security Board Provide national leadership on Established by the nation’s energy market development energy ministers to coordinate which is important for the OVERVIEW STRATEGIC implementation of recommendations health of the national economy. from the Independent Review into the Future Security of the National Electricity Market (Finkel Review). The Energy Security Board also provides whole of system oversight for energy security and reliability. AER AEMO Australian Energy Market OUR ORGANISATION Energy Regulator Operator Compliance, enforcement and Electricity and gas systems economic regulation. and market operator. Polices the system and Works with industry to keep monitors the market. the lights on. AEMC Australian Energy Market Commission Rule maker, market developer and expert adviser to governments. REVIEWS AND RULES Protects consumers and achieves the right trade-off between cost, reliability and security. FINANCIAL PERFORMANCE FINANCIAL AEMC How we work The AEMC undertakes reviews and provides federal, state and territory energy ministers with advice on improvements to the design of regulatory and energy market arrangements that will benefit consumers in accordance with the national energy objectives. STATUTORY REPORTS National We also make and amend rules under Electricity Law the National Electricity Law (NEL), the (NEL) National Gas Law (NGL) and the National National Energy Retail Law (NERL). National Gas Law (NGL) Electricity Retail Law (NERL) AEMC ANNUAL REPORT 2019-2020 — 3 Performance summary Rule changes, reviews and advice started and completed 35 RULE CHANGES INITIATED 2018-19 2019-20 Reviews and advice completed 22 Reviews and advice 48 started RULE CHANGES 19 COMPLETED Rule 32 changes completed 13 36 REVIEWS AND Rule changes ADVICE STARTED initiated 17 22 ESB PROJECTS REVIEWS AND ADVICE COMPLETED 97 Employees 89 AEMC rule changes and reviews + 17 Energy Security Board projects 4 — AEMC ANNUAL REPORT 2019-2020 Annual expenditure within budget EXECUTIVE REPORT (target +/- 5%) -8.7% Projects completed and underway 100 STRATEGIC OVERVIEW STRATEGIC 90 90 89 Staff by gender 80 78 70 67 60 46% 54% 50 female male 2016-17 2017-18 2018-19 2019-20 OUR ORGANISATION 30+ RULE REQUESTS Actual expenses Sustained high rate of rule change FOR THE THIRD requests received CONSECUTIVE YEAR 40 38 3% 35 33 depreciation 35 30 RULES AND REVIEWS AND RULES 65% 32% 30 30 employee supplies 25 18 benefits and expense services 20 15 16 16 10 5 0 Working faster – categories for 2016-17 2017-18 2018-19 2019-20 completed electricity, gas and All requests retail rule changes Initiated within four months FINANCIAL PERFORMANCE FINANCIAL 50 13 40 0 30 16 8 35 1 20 1 23 10 16 Expediated Fast tracked 0 Standard 7.4 2017-18 2018-19 2019-20 OUT OF 10 For stakeholder STATUTORY REPORTS 41 consultation Forums and 875 workshops 1250 Submissions Leadership group formal stakeholder meetings AEMC ANNUAL REPORT 2019-2020 — 5 Chair & Chief Executive message generation. The system is moving away from being dominated by central, large power plants as technology drives widespread decentralisation. Emerging technologies are empowering consumers to self-manage their energy in a way that they never could before. One of the most pressing challenges that comes with this change in the energy system is addressing the physical needs of the power system – commonly referred to as power system security. MERRYN YORK BEN BARR ACTING CHAIR CHIEF EXECUTIVE The new technologies have very different physical characteristics. This year the AEMC farewelled Over the past year we have The thermal generators being retired continued to develop energy market and reaching their end of life had its long-standing Chairman, inherent features that automatically John Pierce and welcomed reforms to cater for the changes to the way energy will be generated and stabilised voltage and frequency as a a new Chief Executive Benn delivered to consumers. We have also by-product of generating electricity. Barr. We recognise the key responded to the impacts from the Unlike in Europe, we cannot connect reforms made to market and COVID-19 pandemic. Like our market to the power systems of other regulatory arrangements body colleagues, the AEMC moved countries to draw on their dispatchable resources when the wind isn’t blowing under John’s leadership rapidly to reprioritise our work to ease the regulatory burden on the energy and the sun isn’t shining. over the last decade that set industry amid a coronavirus-related The AEMC has already introduced a the foundations for better cash crunch. number of reforms aimed at making the consumer outcomes. The number of rule change requests system more resilient, and continues we receive is again high as industry to do so. We have worked closely with participants continue to take advantage the Australian Energy Market Operator of their ability to shape the regulatory to understand the physical needs to and market arrangements. secure the system and are focussed on developing and evolving the regulatory Like many countries, Australia is and market arrangements to incentivise undergoing a transformation in the way greater provision of services such as energy is generated and delivered. system strength and voltage control Household and business uptake of including investment. rooftop solar PV has proved rapid and battery storage is increasingly being These changes to the energy system adopted. South Australia is now a also create opportunities to develop world-leading adopter of renewable new knowledge and expertise to integrate high levels of renewables to achieve a secure and reliable power system. Innovation and technology development will play a significant role in future energy systems, throughout the world. 6 — AEMC ANNUAL REPORT 2019-2020 This year we announced rule changes EXECUTIVE REPORT that will make it easier for large users such as manufacturers and data centres to bid their demand response into the market on a daily basis. This rule change, one of our most significant reforms, was brought about by a request from stakeholders: the Public Interest Advocacy Centre, the Total Environment Centre and the Australia Institute. Longer term, the AEMC’s vision is contribution to Australia’s economic OVERVIEW STRATEGIC “ The number of rule for a truly two-sided market, which output. These reforms have allowed may be suited to small customer investors to better manage risk and change requests involvement. Developments in reduced their costs, which has flowed we receive is again digitalisation will provide households through to customers. and businesses automation and other high as industry digital technologies to better manage We released our 10th report on demand with all their appliances. New residential electricity price trends participants technologies such as electric vehicles, this year. Consumers in the national battery storage and the development electricity market are enjoying falling continue to take of microgrids will add another prices as rooftop solar PV and other dimension to this consumer-centric generation supplies rise and regulated advantage of their market. With a two-sided market, both network prices are lowered. Spot OUR ORGANISATION the