The Australian Energy Market Commission has finalised three new rules to assist the east coast gas system navigate short term supply shortages.
Supply-demand balances are tightening as coal generators retire and gas plays a larger role in electricity reliability during the transition. At the same time, Governments are working on longer term frameworks to manage the ongoing need for reliable gas supply. The existing framework was not designed for the complex needs of the transition.
AEMC Chair Anna Collyer says the case for reform is straightforward.
“Gas provides heating and hot water to many Australian households and is a critical energy source and feedstock for many industries. The market needs improved visibility of emerging supply pressures and the tools to manage them,” Ms Collyer said.
"What we've proposed today is better forecasting and practical tools the market needs to operate efficiently when supply is tight. Earlier visibility, clearer warning signals and transparent rules for action by the Australian Energy Market Operator (AEMO), if market response is insufficient. Each serves a specific purpose.”
The three reforms
These three reforms give the market the visibility and signals it needs to respond, with clear rules for AEMO if intervention is required.
Projected Assessment of System Adequacy (PASA) introduces market demand-supply outlook information the east coast gas system currently lacks.
The Australian Energy Market Operator (AEMO) will publish daily forecasts with a seven-day outlook and weekly forecasts with a 12-month horizon.
This fills a critical gap between the annual Gas Statement of Opportunities and real-time operations, giving retailers, producers and pipeline operators time to adjust before supply shortfalls develop.
Enhancing Reliability and Supply Adequacy Arrangements (ERSAA) introduces a tiered risk signalling framework that provides improved detail and nuanced information for participants.
Under the new rules, AEMO will classify any risks and threats to reliability into three transparent tiers based on the probability and severity of shortfalls:
- Tier 1 signals early tightening and raises a signal for potential action.
- Tier 2 signals that market response is needed.
- Tier 3 indicates a threat to reliability, requiring potential intervention by AEMO if the market does not act.
ERSAA also establishes a Gas Reliability Committee, made up of industry representatives, consumer advocates, and AEMO, to advise the AEMC on reviews of gas market price settings. The committee will conduct reviews every four years to ensure settings reflect current market conditions.
The Supplier of Last Resort Mechanism (SoLR) provides clarity and guardrails for AEMO's intervention powers. It can only be used after AEMO signals a tier 3 threat and industry participants have been unable to resolve the reliability threat themselves.
If required, AEMO will be able to deploy supply or demand response by contracts secured through competitive tender, rather than intervening directly in markets.
"We listened carefully to stakeholder feedback throughout consultation, and that feedback strengthened the final rules. The result is a framework that industry can work with, supports efficient market operation, and protects consumers when the market cannot respond,” Ms Collyer said.
Implementation timeline
The rules will be implemented progressively. AEMO begins updating procedures and guidelines immediately, with the risk signalling framework and the SoLR mechanism operational by April 2027.
PASA commences operation in June 2028 after AEMO and industry participants complete building the necessary system and a test period.
Full implementation of all three reforms is scheduled for mid 2028.
Background
Energy Ministers implemented stage 1 reforms in 2023, which gave AEMO broad powers to address reliability risks and threats, but left a gap in the framework. Stage 2 closes that gap by improving visibility, strengthening signals, and clarifying intervention rules.
Stage 2 addresses near-term supply tightness during peak demand periods. Together with Stage 1 and the previously finalised Notice of Closure rule, Stage 2 creates a complete reliability framework for managing short-term gas supply risks.
For more information including the final determinations, visit the project pages for Enhancing Reliability and Supply Adequacy Arrangements, Supplier of Last Resort, and East Coast Gas System Projected Assessment of System Adequacy.
About the AEMC
The Australian Energy Market Commission (AEMC) is an independent statutory body that advises Australian governments on energy market rules and conducts reviews of the energy sector. The AEMC's work is guided by the long-term interests of energy consumers, including reliable, safe and affordable energy.
Media: Jessica Rich, 0459 918 964, media@aemc.gov.au