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There were a series of conditions affecting the National Electricity Market (NEM) between 12 and 23 June 2022 that saw Australian Energy Market Operator (AEMO) trigger administered pricing, spot market suspension and around 500 separate market interventions under the National Electricity Rules.  

The nature and scale of these events was unprecedented in the NEM.   

There were a number of factors made the spot market impossible to operate leading to the market suspension on 15 June 2022: 

• Large scale withdrawal of capacity (6.5 GW of generation offline) 
• Manual dispatch of plant with directions (close to 5 GW on 14 & 15 June) 
• Inability to determine prices due to the number of constraints and conflicts 

Market suspension under the energy rules, occurs when AEMO takes control over the central dispatch of the system, and directs all available generators. During market suspension, supply and demand in the electricity market is settled through a manual process, with a different pricing methodology than normal. The rules also provide for compensation when the pricing schedule is applied. 

One of three criteria must be met: 

• The power system in a region has collapsed to a black system 
• AEMO has been directed by a jurisdiction to suspend 
• AEMO has determined it has become impossible to operate the spot market in accordance with the rules 

Under the suspended market, generator revenues are determined by a combination of pre-set historical costs and prices. Where these are inadequate to cover the actual costs of the electricity generation, generators make a claim for compensation. 

These costs are called “Energy Compensation Recovery” charges and are passed through from AEMO to retailers like EnergyAustralia. 

We in turn recover these costs (on a cost recovery basis) from our customers. 

There are 3 different compensation related costs:  

1. Directions compensation 
2. Suspension pricing compensation and  
3. Administered pricing compensation 

The cost of the events are available on AEMO’s website, and you can find the link here.   

1. Directions compensation (directed participants for energy, ancillary services or other compensable services)  

July 2022 

• the provisional amount was $2.1m (NEM total) 

January 2023 

• Additional compensation (NEM total$6.6m) 
• Fair payment for other services (NEM total $9.6m) 

      2. Suspension pricing compensation (for eligible costs not covered by spot prices when set/affected by market suspension pricing schedule prices) 

July 2022 

• The provisional amount (NEM total $7.2m) 

January 2023 

• Additional compensation (NEM total $87.6m) 

      3. Administered pricing compensation (for eligible costs when spot market prices were set/affected by the administered price cap) 

• As at 1 March these costs have not been finalised by AEMO. Currently the costs are (NEM total $17.1m) 

Please note: As at 1 March EnergyAustralia has not passed on costs for this yet.

The provisional amounts for Directions Compensation and Suspension Pricing were passed through to EnergyAustralia customers on their August 2022 invoice. 

The additional compensation amounts which were finalised by AEMC and passed onto AEMO in January 2023 for Directions and Suspension compensation will be passed on to EnergyAustralia customers in their March invoice which they will receive from 1 April.  

For Directions and Suspensions Compensation, yes. 

However, The Australian Energy Market Commission (AEMC) has until the end of March to make a final decision on the claims for Administered Pricing Compensation and it will then take approximately two months for these charges to flow through to AEMO and then onto retailers.  

We will continue to keep customers updated as and when we receive details from AEMO.  

Cost recovery through NEM settlements occurs in relation to weekly market billing periods. The June 2022 events spanned weeks 25 and 26. Four categories of compensation and contract payments as mentioned in my previous response, are Directions, Suspension and Administered Pricing compensation plus Reliability and Emergency Reserve Trader (RERT) have to be recovered for that two-week period).

These costs are allocated to NEM regions in accordance with the rules, and then recovered from market customers in proportion to energy purchased in each relevant region. 

AEMO directed claims to be submitted by 10 August 2022. 

Claims then assessed and final settlement was due in either November or mid-January (depending on whether AEMO needed to use an independent expert). 

For Administered Pricing Compensation as mentioned the AEMC has until the end of March to make a final decision on these charges which will then flow on EnergyAustralia from AEMO a few months after that. 

EnergyAustralia passes on these costs as they are allocated to us from AEMO. It is allocated based on customer consumption during those time bands in that region.  

Yes, it will be a separate line item in the adjustments section on March invoices issued from 1 April. It will be clearly identified as ‘AEMO charge for additional direction and suspension pricing compensation week 25-26'.  

We understand these costs may come as a surprise and we are committed to helping our customers during these complex times.  

Should you need assistance or would like to discuss these charges or payment options further, please reach out to your account manager directly or call us on 1300 362 466. 

Market suspension is a last resort, and the last time it was invoked was in the September 2016 South Australian event. We certainly hope we don’t see it back any time soon. 

Direction Compensation charges will not impact UFE calculations and charges. They are separate market related charges.