Proposed changes to rules for generator closures

The Morrison Government is taking action to safeguard the delivery of affordable, reliable power for consumers through a proposed change to energy laws to require energy companies to give a longer period of notice for the closure of electricity generators.

Minister for Industry, Energy and Emissions Reduction Angus Taylor has written to the Australian Energy Market Commission (AEMC) to ask for a change to the National Electricity Rules to extend the notice period from 3.5 years to a minimum of five years. 

This is a critical reform to ensure that the energy sector has enough time to build new projects to replace exiting capacity, with the lead time required to construct most forms of new generation far exceeding the current 3.5 year notice period.

“The Morrison Government is committed to ensuring ongoing reliable and affordable energy. This means it is critical to ensure there is a pipeline of projects that can be delivered to replace existing capacity, keep the system reliable and secure, and keep power prices down for Australian households, businesses and industry,” Minister Taylor said. 

“If accepted, the rule change will increase notice of closure requirements to 5 years to allow adequate lead time for new capacity to be built to replace exiting generation, and to prevent potential gaming of notice of closure requirements by market participants.

“This is a sensible change, and necessary to ensure the National Electricity Market (NEM) remains reliable and secure.

“Without this rule change, there is a risk that retiring capacity is not replaced in time or is only able to be replaced with inadequate or inefficient options that are available in short timeframes, risking the reliability, affordability and security of the system.

“This is about putting the interests of energy consumers first, which is at the heart of the Morrison Government’s energy policy.” 

The proposed new rule also includes a new definition of ‘longer term mothballing’, within notice of closure arrangements. A longer term mothballed plant will be defined as a generator that will be unable able to dispatch for 9 months or longer over a 12 month period.

These generators would be subject to the same notice period that applies to permanent closures, to avoid potential gaming where generators could mothball a plant indefinitely without providing any notice or date of an intended closure.

Seasonal mothballing, defined as a generator not being available to dispatch electricity into the NEM for less than 9 months over any 12 month period, would not be subject to notice of closure requirements. 

The new rule would also prohibit speculative notices of closure when the generator has no actual intention to close the plant on the specified date. 

“This rule is intended to prevent generators from engaging in behaviour that could create uncertainty in the market and act as a deterrent to new investment,” Minister Taylor said.

Under the proposed rule, the Australian Energy Regulator (AER) would investigate any notice that it suspects to be speculative, using its existing investigative and information gathering powers.

Media contact: 

Minister Taylor's office 02 6277 7120