Marginal Loss Factor (MLF) Frameworks Reform Research

Timeline

Key contact

Email: [email protected]

Overview

The National Electricity Market (NEM) and Western Australia’s Wholesale Electricity Market (WEM) operate on marginal loss factor (MLF) frameworks, where a single intra-regional MLF is determined for each transmission node ahead of and then applied to dispatch and settlement for a financial year. The MLF frameworks are established in the National Electricity Rules (NER), which oblige AEMO to determine calculation methodologies that are consistent with these frameworks.

AEMO conducted a consultation on the MLF methodology in 2024 where several ideas were raised by stakeholders for MLF reform. AEMO subsequently held a series of stakeholder workshops and commenced a research project to further explore the benefits of options most preferred by stakeholders.

AEMO published the initial findings of this research in a draft report for stakeholder review and feedback. The draft report received seven submissions, many of which supported the draft report’s recommendations. AEMO has considered these submissions and responded to them in detail in the final report.

As a result of this research project AEMO has submitted a NER change to the Australian Energy Market Commission (AEMC) to introduce a stability principle into MLF determination. If this rule is made, AEMO intends to consult on implementing a glide path via its Forward-Looking Loss Factor (FLLF) methodology.