Image Credit: Michael Greenhill

Two of Australia’s largest electricity companies have financial penalties issued by the Australian Energy Regulator for failing to follow operating instructions for during one of the hottest days of the 2016 summer.

In a statement, the Australian Energy Regulator outlined the details of the penalties issued to AGL and EnergyAustralia, relating to failures to ensure power stations matched instructions issued by the market operator.

AGL paid a penalty of $20,000 for breaches of instructions issued by the Australian Energy Market Operator (AEMO) for withholding otherwise available generation capacity at its gas-fired Somerton Power Station in Victoria.

EnergyAustralia was issued two breach notices, paying total penalties of $40,000 for falling to follow instructions at its gas-fired Hallett Power Station in South Australia and the brown coal-fired Yallourn Power Station in Victoria.

At each of the power stations, generation was increased by EnergyAustralia without having received explicit instruction from AEMO to do so.

The incidents occurred on 13 January 2016, when electricity market prices reached extreme highs, exceeding $5,000 per Megawatt-hour. Average prices in the regions of Victoria and South Australia generally range from $45 to $60 per Megawatt-hour.

The Australian Energy Regulator is obliged to investigate such instances of extreme market prices, which can occur during periods of high demand, or where the ability of power stations to supply electricity is constrained.

The breaches were of additional concern as they occurred during particularly hot summer days, when demand for electricity is highest. On the day, temperatures in Adelaide reached a high of 35 degrees exceeded 42 degrees.

It happened to be the hottest day of the Melbourne summer. Traditionally, demand for electricity is highest during summer months, and particularly during extended heatwaves, as wide use of air-conditioning systems drives up demand for electricity.

Gas-fired power stations, such as AGL’s Somerton power station and EnergyAustralia’s Hallett power station provide additional generation capacity in response demand peaks, due to the ability to quickly wrap-up or down output from gas turbines.

News of the penalties comes mid-way through a review of the National Electricity Market, led by Chief Scientist Dr Alan Finkel. The terms of reference for the review will include an investigation of the regulatory and governance arrangements in place for the market as well as analysis of energy security arrangements.

In commenting on the penalties, the Australian Energy Regulator cited the importance of power stations following market instructions to ensure stability and reliability of supply for consumers.

“Our review of the high price events identified incidences where the AER considered that generators owned by EnergyAustralia and AGL did not comply with dispatch instructions issued by the Australian Energy Market Operator,” AER Board member Jim Cox said.

“System security may be compromised when dispatch offers made by generators are not accurate and where generators fail to comply with dispatch instructions given by the Australian Energy Market Operator,” Mr Cox said.

“The reliable supply of electricity to consumers depends upon the power system being operated in a secure manner,” he added.

EnergyAustralia operates 3,600 Megawatts of generation capacity in the National Electricity Market.

AGL controls more than 10,000 Megawatts and is the largest owner of generation capacity in the National Electricity Market.

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