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Draft rule to increase credit support options and flexibility

03 April 2025

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

AEMC launches review of the wholesale demand response mechanism

13 March 2025

The Australian Energy Market Commission (AEMC) has initiated a review into the wholesale demand response mechanism (WDRM), with the release of a consultation paper today, as required under the National Electricity Rules.

The WDRM, which commenced operation in October 2021, aims to enhance the flexibility and reliability of the National Electricity Market (NEM) by allowing demand response to bid directly into the wholesale market as a substitute for generation.

Demand response refers to the ability of energy users to temporarily reduce or shift their electricity consumption during periods of high demand or system stress, helping to balance the grid without the need for additional generation.

AEMC Chair Anna Collyer said the review is timely given the Commission’s recent work on two-sided market solutions.

"The AEMC's work through integrating price responsive resources mean that there are new opportunities for both energy suppliers and users to participate in ways that weren't possible before," Ms Collyer said.

"Our review will ensure that the market is set up to ensure that the demand side, from households to large customers, are able to participate in the market and be rewarded for their participation."

The consultation paper seeks stakeholder feedback on whether recent regulatory developments have influenced the need for the WDRM or if modifications could enhance its effectiveness.

Key considerations include:

The impact of recent market reforms on two-sided market development
Whether the WDRM continues to serve its intended purpose given evolving market conditions
How the WDRM fits within the broader framework of demand-side participation

"Through this consultation process, we want to hear directly from market participants about how the WDRM functions within the context of our evolving energy market," said Ms Collyer.

"This feedback is critical as we evaluate whether our recent rule changes on Unlocking CER benefits through flexible trading and Integrating price-responsive resources into the NEM, have created market conditions that complement or potentially overlap with the WDRM's objectives."

To explore these issues, the AEMC is asking for submissions on the consultation paper by Thursday 24 April 2025.

Visit the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC updates market price cap for 2025-26

27 February 2025

The Australian Energy Market Commission (AEMC) has released updates to key reliability settings that apply to the national electricity market (NEM).

Under the National Electricity Rules, the NEM's market price cap (MPC) and cumulative price threshold (CPT) must be adjusted in line with the consumer price index by 28 February each year.

The MPC is the maximum price that can be reached on the spot market during any dispatch and trading interval. The CPT is the maximum price across seven days’ worth of trade.

On 7 December 2023, the Commission made a final rule to increase the base rate of the MPC and CPT, which will progressively increase from 1 July 2025 through to 1 July 2027.

The values for 2024-25, the new base values, and the CPI-adjusted amounts for 2025-26 are as follows.

	From 1 July 2024 to 30 June 2025	New Base Value (2022)	From 1 July 2025 to 30 June 2026
MPC	$17,500/MWh	$18,600/MWh	$20,300/MWh
CPT	$1,573,700/MWh	$1,674,000/MWh	$1,823,600/MWh

The updated values and underlying calculations for 2025-26 are in a schedule of reliability settings on the AEMC website.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC makes jurisdictional derogation to support reliability in South Australia

23 January 2025

The Australian Energy Market Commission (AEMC) has made a final rule to help secure South Australia's electricity supply this summer. The decision allows two additional power stations to be considered as emergency backup power sources.

The temporary rule change enables the Australian Energy Market Operator (AEMO) to consider contracting Snuggery and Port Lincoln power stations (owned by ENGIE) in South Australia as emergency out-of-market reserves. This exemption from usual market restrictions will end on 31 March 2025.

Without sufficient backup electricity reserves, South Australia could face potential load shedding during severe cases of reliability shortfalls, particularly during extreme weather events. Such an outcome could severely impact households and businesses.

The Commission made this one-off exemption due to a combination of specific factors:

AEMO has identified worsening reliability risks for South Australia this summer
an insufficient response to AEMO's tender for emergency reserves has increased load shedding risks
two power stations (Snuggery and Port Lincoln) were unavailable due to mothballing.

While the Commission remains committed to preserving the wholesale market as the primary means of ensuring reliability, this temporary measure is warranted given the unique combination of factors that exist.

The rule change was processed urgently with one round of stakeholder consultation. No objections were received to using this expedited process.

Visit project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Energy market gets clear vision: Reform opens door for all to benefit from virtual power plants

19 December 2024

The Australian Energy Market Commission (AEMC) has released a final determination that allows virtual power plants to compete directly with large-scale generators in the energy market, to the benefit of all consumers through significant cost savings, lower emissions, and reduced energy prices.

The reforms create efficiencies by allowing virtual power plants and commercial and industrial demand response and aggregated batteries to compete directly with traditional power stations.

Currently there is no mechanism for the market to predict how these resources will respond to daily price fluctuations.

This gap in market knowledge creates significant operational challenges for the Australian Energy Market Operator (AEMO) and can lead to costly system operations. These problems are growing as the rollout of batteries and electric vehicles gathers pace.

AEMC Chair Anna Collyer said this work represents a pivotal moment in our energy market's evolution.
''This reform is like giving the electricity system a pair of glasses – suddenly, it can see and respond to retailers' and customers' actions that were previously invisible.

''We are enhancing market efficiency by creating new opportunities for both energy suppliers and users to participate in ways that weren't possible before,'' she said.

The reforms create a new ''dispatch mode'' that allows retailers to bid these resources into the wholesale electricity market.

This includes virtual power plants combining household batteries, community batteries, backup generators, and large energy users managing their consumption.

"Whether it's data centres shifting computing load, manufacturers using backup generators, commercial chillers, or household batteries aggregated as virtual power plants, retailers can now bid these resources into our wholesale market," Ms Collyer explained.

The Commission's modelling shows that if these resources participate, it could deliver $834 million in cost savings between 2027 and 2050 through more efficient market operation.

To overcome initial barriers and secure these long-term benefits for consumers, the reforms include a $50 million incentive scheme for early participants.

"This improved visibility will lead to more efficient generation use, lower system costs, and reduced energy prices for all consumers.

''While there are costs to encourage early participation, the long-term benefits for consumers far outweigh these initial investments. It's a win-win that doesn't require changing behaviour, just smarter market operation." Ms Collyer said.

The reform represents the primary focus of the AEMC's work program for integrating consumer energy resources into the wholesale electricity market.

The new framework will take effect from May 2027, with incentives available from April 2026.

Visit the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC examines economic assessment of inertia procurement options

12 December 2024

The Australian Energy Market Commission (AEMC) has today released a Directions Paper examining potential approaches for procuring inertia – a crucial service that helps maintain power system stability as Australia transitions to more renewable energy.

AEMC Chair Anna Collyer said the paper examines whether there could be value in complementary ways to secure inertia services.

"Our analysis examines potential benefits of procuring inertia in operational timeframes, which could complement our existing framework," Ms Collyer said.

The paper progresses the AEMC’s assessment of the proposed introduction of operational procurement of inertia
The AEMC proposes that while minimum levels of inertia are best met by long term procurement, there is merit in exploring further whether operational procurement of additional levels could potentially help reduce system costs and support efficient dispatch.

The analysis indicates there may be economic benefits in procuring additional inertia in real-time.

However, the Commission emphasises that further investigation of technical feasibility, implementation considerations and costs is needed before determining the most appropriate approach.

The Directions Paper identifies several key areas requiring further examination, including:

The interaction between any new procurement mechanism and existing frameworks
Technical requirements and capabilities
Implementation and operational considerations
Costs and timing of potential reforms.

"While our initial economic assessment shows potential benefits, we need to carefully examine the technical and practical considerations to determine the path that provides the best outcomes for consumers," Ms Collyer said.

The AEMC is seeking stakeholder feedback on the analysis and considerations outlined in the Directions Paper by 5 February 2025. This input will inform the draft determination, expected in June 2025.

For more information and to access the directions paper, please visit the Efficient provision of inertia project webpage.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC’s transmission access recommendations focus on supporting the effective delivery of jurisdictional schemes

12 December 2024

Energy Ministers have noted the Australian Energy Market Commission’s (AEMC) recommendations on transmission access reform, specifically not to implement the hybrid model.

The AEMC's final report, delivered to Ministers in September 2024, recommended against implementing the proposed hybrid model of transmission access reform, concluding that existing and planned jurisdictional schemes like Renewable Energy Zones (REZs) and the Capacity Investment Scheme (CIS) are already providing locational signals for investment.
Instead, the AEMC made a series of recommendations that focussed on supporting jurisdictional schemes to drive efficient investment in the energy system.

The hybrid model, which combined priority access arrangements and a congestion relief market, was proposed by stakeholders and developed by the Energy Security Board and Energy Advisory Panel.

The AEMC's work to further develop the model in consultation with market bodies and stakeholders found that in the current context of rapid energy system transformation, it was not clear that the model's benefits would outweigh its implementation costs and complexity.

The AEMC made recommendations to support the effective delivery of jurisdictional schemes including:

establishing a collaborative forum between jurisdictions and market bodies to support effective delivery of schemes
improving the quality and timeliness of locational information through AEMO's Enhanced Locational Information reports
enabling the AER to strengthen incentives for transmission networks to progress efficient, low-cost congestion solutions
a focus on congestion impacts when designing and implementing schemes that underwrite new energy infrastructure.

AEMC Chair Anna Collyer said the recommendations recognise that coordinating generation and transmission investment through jurisdictional schemes provides a practical pathway for managing the significant transformation required in the National Electricity Market.

"A coordinated and timely transition to a net-zero electricity system is in the long-term interest of consumers.

''Our recommendations focus on ensuring jurisdictional schemes can effectively deliver low-cost, low-emissions energy when and where consumers need it," she said.

Access and pricing arrangements are fundamental components of the National Electricity Market's regulatory framework, designed to signal where generation should locate and how it should operate. Such signals will be increasingly important in the transition to a grid dominated by variable renewable energy.

While reforms to national arrangements could improve these signals, the AEMC found that jurisdictional schemes are currently providing a practical way to coordinate and manage the significant scale and speed of investment required on the pathway to net zero.

The AEMC's recommendations aim to support the effective delivery of these schemes through improved coordination and information sharing between market bodies, governments, and industry participants.

For more information and contact details, visit the project page.

Media: Jessica Rich | 0459 918 964 | media@aemc.gov.au

Final rule to help mitigate cyber threats on the electricity system

12 December 2024

The Australian Energy Market Commission (AEMC) has published a final rule to better protect the electricity system against the threat of cyber attacks.

The rule, which commences immediately, clarifies the role and responsibilities of the Australian Energy Market Operator (AEMO) in preparing for and responding to evolving cyber needs.

Robust and clear cyber security measures are of critical importance as the electricity system becomes more digitised, decentralised and interconnected.

AEMO has been proactively working with industry and the relevant agencies to increase cyber security resilience.

AEMC Chair Anna Collyer said embedding AEMO’s role in the National Electricity Rules (NER) provides market participants and consumers with greater certainty.

“A cyber attack on the electricity system could have far-reaching consequences that impact millions of Australians,” Ms Collyer said.

“It is therefore essential that our rules continue to evolve to counter these threats as they become more sophisticated.

“Our final rule builds on existing measures to support a more strategic and coordinated approach to energy security.”

Cyber security is now explicitly established as one of AEMO’s power system security responsibilities within the rules. The final rule embeds four key cyber security functions for AEMO:

Coordinating a NEM-wide cyber incident response plan
Supporting energy businesses in cyber incident preparedness
Providing expert cyber security advice to government and industry
Distributing critical cyber security information to market participants

Formalising AEMO’s role enables additional resourcing for it to sustain and scale up these functions.

The functions are also designed to work alongside AEMO’s emergency powers and the Australian Energy Sector Cyber Security Framework (AESCSF).

The final rule follows a rule change request from the Hon. Chris Bowen MP, Minister for Climate Change and Energy, and has been well received by AEMO and the energy industry.

View the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC delivers final recommendations to improve market compensation frameworks

12 December 2024

The Australian Energy Market Commission (AEMC) has delivered recommendations to improve national electricity market (NEM) compensation frameworks that help to ensure consumers are provided with reliable electricity at times when the market is under stress.

In a final report published today, the AEMC outlines proposed administrative, governance and methodology updates to the guiding compensation frameworks for market directions, market suspension and administered pricing.

AEMC Chair Anna Collyer said the final recommendations follow a review into compensation frameworks and the events of June 2022 when global and local factors culminated in the electricity market entering into an administered pricing period.

“Every day, our people at the AEMC are working towards the small and large scale improvements that will ensure the energy rules are fit for purpose as the geopolitical landscape evolves, climate changes and the market transforms on the journey to net zero,” Ms Collyer said.

“Efficient and effective compensation frameworks are essential for providing confidence to market participants to keep the NEM operating smoothly and reduce risk of outages during occasional periods of market stress.

“We have taken insights from the conditions that occurred in June 2022 and made a series of proactive updates to the frameworks that should promote greater energy security and reliability for consumers.”

The AEMC has made five key recommendations, with the aim to provide greater simplicity, consistency and clarity across compensation frameworks.

The changes include:

specifying an objective for the directions compensation framework in the rules
allowing participants to apply for opportunity costs in each compensation category
improving the method for calculating directions compensation
nominating AEMO to receive all compensation claims and assess them together with the independent expert, whose role in the claims assessment processes will be extended to assessing opportunity cost claims
improving and clarifying administrative rules and timelines, including establishing time limits on the provision of information that will help ensure timely settlement of claims.

Ms Collyer said the recommendations take into consideration and complement the AEMC’s 2022 rule change to increase the administered price cap from 2025-2028 to facilitate greater reliability during market disruptions.

“Our final recommendations follow extensive consultation with consumer and industry stakeholders and combined with the 2022 change to the administered market price cap, they will provide the certainty the market needs to make decisions that will serve to bolster reliability.”

The AEMC looks forward to receiving rule change requests that would allow the current rules to be updated with the recommended improvements.

Please visit the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC proposes expedited rule change to support reliability in South Australia

28 November 2024

The Australian Energy Market Commission (AEMC) has published a consultation paper in response to an urgent rule change request from the South Australian Government that seeks a time-limited jurisdictional derogation.

The proposal would allow the Australian Energy Market Operator (AEMO) to consider procuring two mothballed generators to support reliability this summer.

The Engie-owned Snuggery and Port Lincoln peaking plants came offline on 1 July 2024. Under the National Electricity Rules, AEMO cannot enter into scheduled reserve contracts with plants that have been available for dispatch within the last 12 months.

The issue stems from AEMO’s 2024 Electricity Statement of Opportunities (ESOO) which forecasts reliability risks in South Australia over summer.

Without sufficient backup electricity reserves, AEMO may need to resort to load shedding during extreme cases of reliability shortfalls. This would severely impact households and businesses, particularly if it coincides with an extreme weather event.

The AEMC is therefore proposing to use an expedited eight-week process to assess the request to help mitigate system reliability and security risks. Stakeholders can object to the expedited process by lodging a written objection with reasons.

Visit project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

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