Background on removing constrained-on payments
Constrained-on payments are paid to out of merit generators and dispatchable demand required to meet demand and maintain security.
Constrained-on payments are intended to be paid to generators and dispatchable demand that is required to meet demand and maintain security, but whose offer prices are too high to be dispatched in normal circumstances (ie, they are “out of merit”).
For generators, constrained on payments are, for the generation volume dispatched from the higher priced tranche(s) of the generator’s offer, the difference between:
- the generator’s offer price; and
- the final nodal price.
Constrained-on payments ensure high cost generation is available when within-merit generation is insufficient to maintain security and meet demand. Constrained-on payments are intended to enable high cost generation to recover its costs when it is dispatched out of merit.