The Retail Reliability Obligation (RRO) commenced on 1 July 2019. The RRO framework is designed to send early investment signals to the market in relation to impending supply shortfalls, providing time and incentives to invest in new supply-side or demand response capacity to fill the predicted generation shortfall.
The RRO requires that, if a reliability gap period is forecast for a NEM region, liable entities enter into sufficiently firm ‘qualifying contracts’ to cover their share of the one-in-two year peak demand forecast for the region and reliability gap period. The share is based on the metered energy consumption at the liable entity’s connection points in the reliability gap region.
A liable entity is required to demonstrate to the Australian Energy Regulator (AER) that it meets its qualifying contract requirement approximately one year before the commencement of the reliability gap period (T-1).
Once a T-1 reliability instrument is made by the AER, AEMO may start procuring resources through the reliability and emergency reserve trader (RERT) framework to fill the remaining gap. Certain costs of the RERT acquired for that purpose are recoverable by AEMO from any PoLR liable entities in the relevant region through the PoLR cost allocation mechanism.
The PoLR Cost Procedures set out this mechanism by which AEMO calculates and allocates, recovers and rebates PoLR costs for liable entities under the RRO.
The PoLR Cost Procedures are effective from 20 November 2020.