Hornsdale incurs $900,000 penalty for breaching the National Electricity Rules

Articles Written by Anthony Groom (Partner), Audrey Lian (Associate), Laura Baulch (Law Graduate)
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Hornsdale Power Reserve Pty Ltd (Hornsdale) has been ordered to pay an agreed pecuniary penalty of $900,000 to the Australian Energy Regulator (AER) for breaches of the National Electricity Rules (NER).[1] Hornsdale owns and operates South Australia’s Tesla ‘big battery’. Hornsdale contracted with the Australian Energy Market Operator (AEMO) to provide grid stabilisation services in the event of a power disturbance.

On 9 October 2019, there was an unplanned outage at the Kogan Creek Power Station. Hornsdale under-delivered frequency control ancillary services in breach of its contract. Further investigations found that a battery update performed by Tesla on 23 July 2019 limited Hornsdale’s ability to provide grid stabilisation services. Hornsdale had been paid $3.3 million by AEMO for services it could not provide. 

Upon being made aware of the breaches Hornsdale repaid this money to AEMO.

In the Federal Court proceedings brought by the AER, Hornsdale did not contest it had breached the NER and the penalty imposed was one proposed jointly to the court by the parties.  Although the breaches were inadvertent the court took into account the number of the breaches and the AER’s submission that the breaches were not detected by Hornsdale due to failure to undertake sufficient performance monitoring in accordance with its generator compliance program.  Also relevant was the fact it was difficult for AEMO/AER to detect such breaches were occurring.

The case is part of a series of cases demonstrating the AER’s increasing focus on enforcement and the fact fines for breach of the NER are steadily increasing.

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

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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