The Australian Energy Market Commission (AEMC) has published a draft determination that would expand credit support options available to participants in the National Electricity Market (NEM). 

The draft rule would allow the Australian Energy Market Operator (AEMO) to accept cash and surety bonds as credit support from market participants, in addition to bank guarantees or letters of credit that are currently permitted.

AEMC Chair Anna Collyer said the Commission has made a more preferable draft rule that balances the benefits of increased flexibility while managing potential risks.

"Our draft determination provides greater flexibility for market participants to meet their financial security requirements, which will help reduce costs and barriers to entry, particularly for smaller retailers," Ms Collyer said.

"This expanded range of options also addresses growing concerns about access to traditional credit support options for some participants, while supporting reliable electricity supply and delivering benefits to consumers through enhanced retail competition."

Under the current rules, net debtors in the market – typically retailers who purchase electricity and owe money to the market – must provide a bank guarantee or bank letter of credit as credit support. Securing these guarantees often involves lodging cash with the lender in addition to paying fees. 

The draft rule would allow participants to provide up to $5 million in cash as credit support each, use surety bonds from providers meeting acceptable credit criteria, and obtain credit support from a broader range of providers.

These new options would allow participants to provide credit support in the least-cost form for their individual circumstances. This would particularly benefit small and prospective retailers, who typically have higher financing costs and lower access to capital. The flexibility to use cash also means participants can provide credit support directly to AEMO without needing a lender.

The draft rule includes multiple layers of protection against risks if a company becomes insolvent after providing cash as credit support, and also allows AEMO to distribute any delayed credit support payments to other participants in a more timely manner.

The draft changes follow a rule change request submitted by Delta Electricity in October 2024, which considered that a number of institutions were no longer providing financing facilities to certain generators due to their evolving environmental, social and governance (ESG) policies. 

"While the energy transition is progressing, the AEMC recognises there is ongoing reliance on existing generation, particularly to ensure reliability through the transition period," Ms Collyer said.

"This draft rule would give all participants more options to meet their credit support obligations, whether they're established generation businesses, small retailers, or new entrants bringing innovative energy solutions to market."

Stakeholder submissions on the draft determination close on 15 May 2025.

For more information, contact: AEMC Media: 0409 700 678 media@aemc.gov.au