Federal Court fines power company $9m over major blackout in 2021

The company failed to ensure compliance with performance standards: court

Federal Court fines power company $9m over major blackout in 2021

The Federal Court fined a power company $9m for breaches that led to a 2021 generating unit failure, causing widespread outages and grid instability.

The court imposed the civil penalty on Callide Power Trading (CPT) after the company admitted to breaching the National Electricity Rules (NER). The case arose from the catastrophic failure of the Callide C4 generating unit in May 2021, which caused widespread power outages across Queensland and northern New South Wales.

The Australian Energy Regulator (AER) initiated legal action against CPT, alleging that the company failed to ensure that the Callide C4 generating unit met or exceeded applicable performance standards and that it was properly planned, designed, and operated in compliance with the NER. CPT admitted to these breaches, and both parties reached an agreement on the factual circumstances, applicable legal principles, and financial penalty.

The Callide C4 failure occurred on 25 May 2021, when a battery charger replacement procedure led to a total loss of DC power. This caused the unit’s protection systems to fail, preventing the automatic shutdown of the generator during a critical fault. As a result, the generator continued operating without cooling or lubrication, leading to severe mechanical damage. The event triggered widespread consequences for the National Electricity Market (NEM), including the loss of 3,045 megawatts in generation capacity, which accounted for nearly one-fifth of Queensland’s installed generation. Approximately 488,500 customers in Queensland and northern New South Wales lost power, and electricity spot prices surged as high as $15,000 per megawatt-hour in Queensland. The Australian Energy Market Operator (AEMO) was forced to activate the Reliability and Emergency Reserve Trader (RERT) mechanism, costing market participants $461,018.

The Federal Court found that CPT failed to ensure compliance with performance standards. The protection systems lacked redundancy, preventing them from properly disconnecting the generator during a fault. This failure contributed to the destruction of the Callide C4 unit and the subsequent grid instability. The court emphasised that compliance with generator performance standards is fundamental to maintaining power system security and preventing large-scale blackouts.

Although CPT had no prior violations and cooperated with the AER throughout the proceedings, the court noted that the contraventions were not a result of mere inadvertence. The risks associated with the battery charger replacement should have been identified and mitigated, particularly given that the automatic changeover switch, which could have helped restore DC power, had been inoperable since January 2021.