Understanding AEMO’s budget and fees for 2022-23

29th July 2022

Understanding AEMO’s budget and fees for 2022-23

In June, the Australian Energy Market Operator (AEMO) announced its final budget and fees for 2022-23. Against the backdrop of a rapidly evolving energy market and the need for ongoing reform, customers are facing price increases. Let’s take a look at the budget and what this means for businesses.

What are the new fees?

AEMO has confirmed the National Electricity Market (NEM) benchmark fee for 2022-23 is $1.112 per MWh, which is a significant increase of 88.5% from 2021-22 fees. It includes NEM fees and FRC (Full Retail Contestability), ECA (Energy Consumer Australia), DER (Distributed Energy Resources Integration Programme) and IT fees.

In addition, we’ve seen AEMO set out a three-year NEM fee plan. In the second (2023-24) and third (2024-25) years fees are expected to increase 4.5% per annum. This is to support improvement in the areas of power system security, market systems, wholesale metering and longer-term energy forecasting.

All fees are broken down by who’s paying for them, into three categories; market customers (retailers), wholesale participants and scheduled generators. Wholesale participants are a new category for this budget and includes generators, market network service providers, small generator aggregators, and market ancillary service providers / demand response service providers.

What’s behind the price increase?

There’s a myriad of contributing factors, as is often the case with any price increase. We have a significant year of reform ahead of us as the energy market changes rapidly. We’re dealing with an evolving power supply mix, ageing infrastructure, developing technologies, weather impacts and planning for a sustainable and reliable energy future.

In June, around the launch of AEMO’s 2022 Integrated System Plan (ISP) – a 30-year roadmap for NEM investments – Daniel Westerman, AEMO CEO, highlighted the evolution we’re facing: “Australia is experiencing a complex, rapid, and irreversible energy transformation.”

Investment is required to make reform possible and plan for a sustainable energy future for all Australians. Therefore, part of the fees go towards AEMO strengthening its organisation. Furthermore, AEMO has stated that it is starting to recover its large deficit. Put simply, this all adds up.

Keep looking ahead

Part of this year’s ISP modelling was the identification of the ‘Step Change Scenario’, which AEMO currently considers to be the most likely future outcome. In this scenario Australia moves rapidly towards fulfilling its net zero commitments. It shows the dominance of renewables in the NEM, which should help balance and manage prices across the board as we move forwards. The globe’s increase in digitalisation helps demand management and grid flexibility, with energy efficiency key. By 2050, electricity is powering most homes and transport, with hydrogen present in the transport sector as well.

Back to today, change is starting to happen on a wider scale. AEMO states it has an extensive reform implementation agenda in place to deliver to ensure the country, its markets and systems are fit for our changing future.