FCAS rule changes increase competition in the energy market

Changes to the technical rules around how the electricity system is operated could lead to lower prices for customers. In short, the rule changes will promote greater competition in the market for frequency control ancillary services, or FCAS (don't worry, explained below).

For the electricity network to function correctly supply and demand must be balanced constantly. One element of this is controlling the frequency of the electricity in the network so that it remains within guidelines.

AEMO is responsible for controlling frequency in the electricity network, and does this by purchasing FCAS from organisations that are registered with it. When the frequency in the network is too low electricity generation is increased or demand on the system is reduced (for instance a factory might reduce its electricity usage temporarily). When the frequency is too high, generation is reduced. AEMO pays for these services, and that cost is ultimately passed on to customers.

The AEMC (which is responsible for the rules) has made new rules so more organisations can provide FCAS to AEMO. Traditionally only retailers and generators provide these services.

The idea is to use the growth in distributed generation and technological innovation to increase competition in the market. The ultimate outcomes being lower prices for customers, and a more secure energy market.

The latest change comes into effect later this month.

Greater competition and a more dynamic, open electricity system is something to cheer for, but don't expect a huge slash in your electricity bill. The cost of these services only make up a small amount of what you pay.