The Snowy Mountains used to have its own pricing region in the NEM. Here’s a quick history.
Creation
When the NEM started operating in December 1998, there were 5 regions:
- NSW
- VIC
- SA
- QLD (though priced separately, due to no interconnection)
- SNOWY
The regions were initially defined according to the strength of transmission at different points in the network, and duration of constraint expected in the weaker points. The transmission surrounding the Snowy region was small relative to the massive size of the dams in the area, so constraints were forecast to occur regularly in addition to a material difference between the MLF of Snowy generators and the neighbouring regions of NSW and VIC. So under NEMMCO’s procedures, this necessitated a separate pricing.
However, it wasn’t long before Snowy Hydro Ltd submitted a Rule Change Request to have the Snowy Region abolished.
Abolition
- Problem: Counter-pricing flows were occurring so regularly that Snowy Hydro was incentivised to curtail their generation.
- Impact: Electricity was measurably more expensive than if the connector was removed. Modelling undertaken by the AEMC during the rule change process indicated this. Removing the regional boundary would stop NEMMCO from constraining the interconnectors between the Snowy region and its neighbours (NSW and VIC), better exposing Snowy Hydro generators to the prices of the big cities and incentiving them to continue generating.
- Outcome: On July 1st 2008, the Snowy Region was abolished. Generators in the Snowy were distributed between NSW and VIC regions. Interconnector constraints (due to mis-pricing) became less common, Snowy generators were incentivised to generate more frequently, market operations were simplified for NEMMCO, and energy costs likely reduced for customers as a result.
From the rule change docs, there appears to be a lot of scenarios where constraints inside the Snowy Region (between Tumut and Murray below) would incentivise the Snowy generators to curtail themselves.
Could be relevant given the given the loop flows (and chaotic pricing) that Project Energy Connect may introduce between NSW, SA and VIC in 2028.