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Energy watchdog charges AGL

The Australian Energy Regulator (AER) has charged entities owned by AGL Energy (ASX:AGL) for failing to stabilise the grid as ordered, adding to a series of enforcement actions as pressure mounts to ensure power companies comply with market rules.

According to the AER, AGL Macquarie Pty (AGLM) and AGL Loy Yang Marketing (AGLL), the trading arms of two of AGL Energy’s coal power stations, offered to provide frequency control ancillary services (FCAS) in response to market fluctuations but failed to deliver when instructed by the market operation.

AGLM engaged in this conduct between September 2018 and August 2020 at its Bayswater power station, while AGLL did so between December 2019 and May 2020 at its Loy Yang A power station, the AER stated.

Loy Yang A and Bayswater are among Australia’s largest generating coal power stations. Under the country’s market rules, electricity generators can offer to be on standby to provide ancillary services that stabilise network frequency during power system disturbances.

The AER highlighted that these failures posed a threat to the security of Australia’s National Electricity Market. Both entities have acknowledged the breaches and will seek relief from the court.

Justin Oliver, AER board member, emphasised the importance of generators complying with their offers of ancillary services and dispatch instructions from the Australian Energy Market Operator (AEMO).

To ensure the smooth transition of the market to variable renewable generation, Oliver stated, “Electricity generators must do what they say they will do if we are to keep the lights on. When generators are unable to provide promised standby services, it creates a risk to power system security and stability. We expect them to ensure that they provide those services when called upon.”

AGL Energy responded, stating that the offences were unintended and resulted from incorrect settings on the frequency influence switch during certain periods. The company claimed that no profit was derived from the issue, and funds received for the provision of services were returned to AEMO upon discovery.

The AER’s action comes amid a series of charges brought by the regulator in recent weeks. With mounting public anger over surging energy prices, the AER faces heightened pressure to oversee the market.

The regulator approved price increases of over 20% for most households and businesses in May, marking the second consecutive annual increase. The surging costs of generating electricity, driven by the global energy crunch triggered by Russia’s invasion of Ukraine, have contributed to the price hikes. As major buyers sought alternative energy sources due to Russia’s sidelining, coal and gas prices rose, impacting Australia’s electricity generation.

However, these price increases have faced significant public backlash as Australia grapples with soaring inflation and record interest rate rises. In response, the government has urged regulators to closely monitor energy companies.

The AER has recently fined EnergyAustralia, the country’s third-largest retailer, a record $400,000 for distorting the gas market. Charges and fines have also been levied against Jemina and Incitec Pivot.

As scrutiny on the energy industry intensifies, the AER’s enforcement actions serve as a reminder of the need for compliance and accountability within the sector.