Interim Market Liquidity Obligation Guideline Retailer reliability obligation

Interim Market Liquidity Obligation Guideline Retailer reliability obligation 24 May aer. gov. au 1

Agenda • Overview of the guideline • What has changed in draft to final rules • Response to submissions • Performing the MLO – examples • Compliance • Questions 2 aer. gov. au

RRO – Guideline timetable 3 Interim MLO Guideline • Published Aug 2019 • Used for any MLO from Aug 2019 to 31 Dec 2020 Final MLO Guideline • Published 31 Dec 2020 • Used for any MLO from 1 Jan 2021 aer. gov. au

Interim Market Liquidity Obligation Guideline • The guideline sets out: – The process of an MLO – Obligated parties and the MLO register – Performing the MLO • MLO products • Bids, Offers, Spreads • MLO Exchange – Compliance 4 aer. gov. au

Rules – What’s changed? • Deeming of MLO generators and groups – Registered capacity – Notice of closure • Performing a liquidity obligation – Target trading sessions – Bid-Offer-Spread – Volume limits 5 aer. gov. au

Deeming of MLO generators Region MLO Group Combined registered capacity (MW) 10% 1. 25% Vic. AGL 3020 302 38 EA 1541 154 19 Snowy Hydro 2114 211 26 AGL 1310 131 16 Origin 489 49 6 Engie 861 86 11 AGL 4690 469 59 Origin 3784 378 47 Snowy Hydro 2970 297 37 CS Energy 4044 404 51 Stanwell 3862 386 48 SA NSW QLD 6 aer. gov. au

What's changed - Target trading sessions Draft Rules 25/35 trading periods Final Rules Number of trading periods, less 10 Pro rata for part months 7 aer. gov. au

What’s changed – Bid offer spread • Queensland, New South Wales and Victoria: – Increased to 5% (from 3%) • South Australia: – Increased to 7% (from 5%) 8 aer. gov. au

Volume limits Draft Rules • Met liquidity obligation if: – In a quarter, aggregate MLO group transactions exceeds 1. 25% of MLO groups trading group capacity – In a liquidity period - Aggregate MLO group transactions exceeds 10% of MLO groups trading group capacity Final Draft Rules • • Draft rules (as above), with an addition of: Defined Aggregate MLO group transactions as a net sold position: – MLO group’s aggregate quantity of qualifying MLO transactions, less – Total volume (MW) of MLO products purchased Specified that qualifying MLO group transactions is limited to a maximum of 5 MW (2 MW in SA) per trading period and 1. 25% in a quarter • 9 aer. gov. au

Stakeholder feedback on Interim MLO Guideline • • 10 MLO Products MLO Exchange Bid-offer-spread – clarify how it is calculated Additional exemptions to performing the MLO aer. gov. au

Submissions - MLO products • Guideline should include approval of additional MLO products: – FEX products, monthly contracts and calendar and financial year contracts • Change to AER criteria when considering additional products 11 aer. gov. au

Submissions - MLO exchange • Guideline should include approval of additional MLO exchange (FEX) • Approval of additional MLO exchange process needs more detail 12 aer. gov. au

Submissions - Bid-Offer-spread • Spread (%) has changed in final rules package • Guideline and Rules unclear how the spread is calculated Region/Contract Buy offer (bid) Sell Offer (offer) Spread SA – Quarterly base futures $100/MWh $107/MWh 7% NSW – Quarterly base futures $100/MWh $105/MWh 5% $27. 50/MWh 10% Vic – Cap contract $25/MWh 13 aer. gov. au

Submissions - Exemptions • Currently AER has not proposed any additional circumstances that would exempt obligated parties from performing its MLO • Submissions requested additional criteria: – Price sensitive information – Consider breaking a Law/avoid risk of breaching Corporations act – Prohibited from trading 14 aer. gov. au

Performing a liquidity obligation – volume limits Where Who Reg. Capacity 10% 1. 25% NSW AGL 4690 MW 469 MW 59 MW • Perform liquidity obligation until net sold position of MLO products in a quarter is at least 59 MW – If net sold position is greater than 59 MW, only 59 MW (1. 25%) can contribute to the liquidity period 10%. • Perform liquidity obligation until net sold position of MLO products in liquidity period is at least 469 MW – This can only occur in the last quarter of the period. 15 aer. gov. au

Performing a liquidity obligation – volume limits Where Who Reg. Capacity 10% 1. 25% SA Origin 489 MW 49 MW 6 MW • Perform liquidity obligation until net sold position of MLO products in a quarter is at least 6 MW – If net sold position is greater than 6 MW, only 6 MW (1. 25%) can contribute to the liquidity period 10%. • Perform liquidity obligation until net sold position of MLO products in liquidity period is at least 49 MW – This can only occur in the last quarter of the period. 16 aer. gov. au

Compliance with the MLO • AER will monitor compliance on the MLO Exchange – Trading period (25 mins, bid-offer-spread, # of contracts available) • Number of instances of non-compliance will be taken in to account • Explanation from MLO groups/generators sought • Consider enforcement action 17 aer. gov. au

Discussion and Questions 18 aer. gov. au