The Australian Energy Market Commission (AEMC) has initiated an expedited rule change process in response to an urgent rule change request from Delta Electricity.
The proposed change would allow the Australian Energy Market Operator (AEMO) to accept cash as credit support from market participants in the National Electricity Market (NEM).
This issue has arisen as some generators, particularly those operating coal-fired power stations, are finding it increasingly difficult to obtain traditional forms of credit support due to banks' evolving environmental, social, and governance (ESG) policies.
Currently, NEM participants must provide credit support to AEMO in the form of a bank guarantee or letter of credit from an acceptable lender. Delta, which operates the Vales Point power station in NSW, has reported being unable to secure new credit support arrangements when its current arrangements expire at the end of 2024.
If implemented, the proposed rule change would provide an alternative option for all market participants to meet their credit support obligations. However, there may be potential risks or unintended consequences associated with accepting cash as credit support that need to be carefully considered.
The AEMC is seeking stakeholder feedback on both the problem raised by Delta and the proposed solution.
Key questions include:
- Are there issues with obtaining credit support in the NEM?
- What are the potential impacts if participants cannot meet credit support requirements under the current arrangements?
- Are there any risks or drawbacks to allowing cash as a form of credit support?
- Are there alternative solutions that should be considered?
Given the potential implications for system reliability and security, the AEMC is proposing to use an expedited eight-week process to assess this request. Stakeholders can object to this expedited process by lodging a written objection with reasons by 7 November 2024.
Submissions on the consultation paper are due by 21 November 2024. The AEMC encourages all interested parties to contribute their views to inform this important decision.
Visit project page for more information and contact details.
Media: Jessica Rich, 0459 918 964, media@aemc.gov.au