Australian Energy Regulator v Hornsdale Power Reserve Pty Ltd [2022] FCA 738

Federal Court of Australia

Australian Energy Regulator v Hornsdale Power Reserve Pty Ltd [2022] FCA 738 File number: SAD 176 of 2021

Judgment of: BESANKO J

Date of judgment: 28 June 2022

Catchwords: CONSUMER LAW — application for declarations of contraventions of National Electricity Rules (NER) pursuant to s 44AAG(1) of Competition and Consumer Act 2010 (Cth) (CC Act) and order for payment of civil penalty pursuant to s 44AAG(2)(a) of CC Act — where respondent "Registered Participant" in National Electricity Market (NEM) and registered with Australian Energy Market Operator (AEMO) as "Market Generator" and "Market Customer" with respect to Hornsdale Power Reserve (HPR) — where during relevant period, respondent made market ancillary service offers to AEMO for contingency frequency control ancillary services (FCAS), being services procured by AEMO to ensure that when frequency of NEM goes outside of "normal operating frequency band", frequency recovers — where to qualify for registration to participate in trading markets for contingency FCAS, respondent required to have generating unit or load approved by AEMO, including by providing parameters about generating unit — where "droop", being amount or proportionality of response to variation in frequency, agreed to with AEMO at time of registration was 1.7% — where on 23 July 2019, update on firmware for HPR performed by respondent's contractor assisting in operation and maintenance of HPR, with effect of altering settings such that droop was 3.7% and reducing maximum response capacity of generating unit and load compared to classification by AEMO — where on 9 October 2019, unplanned outage event in response to which power system frequency fell and respondent required to deliver particular contingency FCAS — where respondent's FCAS response less than expected, caused by change in settings as a result of firmware update on 23 July 2019 — where respondent not aware of change until informed by AEMO on 12 November 2019 and on 14 November 2019, relevant settings effecting droop for HPR corrected to 1.7% — where respondent did not comply with cl 4.9.8(a) of NER in respect of 185,738 dispatch instructions given by AEMO for respondent to be ready and capable of providing service stated at nominated range — where respondent did not comply with cl 4.9.8(d) of NER in respect of latest market ancillary service offer during 32,602 trading intervals, because offers for response capability exceeding maximum dispatch capability of HPR — where respondent did not comply with cl 3.8.7A(l) of NER in respect of 690 market ancillary service offers, because response capability did not reflect technical characteristics of generating units — where respondent agrees orders sought by applicant should be made — whether appropriate to make declarations sought — consideration of matters in s 64 of National Electricity Law for which there must be regard in determining civil penalty and other relevant matters — consideration of relevance of statutory maximum in fixing civil penalty in accordance with Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 399 ALR 599 — where among other things, parties submit serious breaches of NER given importance of FCAS to power system security and need to promote proactive compliance because of difficulty for market operator and regulator to detect non-compliance until services actually deployed during frequency deviation — whether appropriate to impose pecuniary penalty sought — orders made