Briefing Note | March 2021

Retailer Reliability Obligation (RRO)

Key Points

The Retailer Reliability Obligation (RRO) was designed to create a legal mechanism to ensure there is sufficient generation to ensure a reliable supply of electricity.
If the RRO is triggered by it places an obligation on electricity retailers to enter into forward contracts with generators to cover their share of peak demand for the time period identified.
The intent of the RRO is to create demand for new generation in order to cover these contracted positions and ensure sufficient demand.
The conditions for the RRO to be invoked are for the AEMO to identify a reliability gap three years in advance in any jurisdiction in its Electricity Statement of Opportunities (ESOO) released by August 31 each year. In March 2020, energy ministers agreed that this condition should be revised to allow the gap to be “called” only one year in advance.The trigger for the RRO is the recently revised reliability standard, which requires expected unserved energy (forced outages) not to exceed 0.0006 per cent of total supply.
The RRO was not triggered by the AEMO in its 2019 ESOO because the three year forward supply-demand balance was not expected to breach the reliability standard.
To protect smaller retailers, a Market Liquidity Obligation (MLO) requires generators to make contracts available to the market.
If the market response to the RRO is not adequate a year out from an expected reliability event, retailers will be required to disclose their contract positions. Those who are insufficiently covered will be required to contribute to the costs of emergency procurement through the Reliability and Emergency Reserve Trader (RERT) mechanism. Civil penalties may also apply.

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