Rule Change: Completed
Overview
On 26 June 2025, the Commission made a final determination in response to a rule change request from Delta Electricity, which sought to allow AEMO to accept cash as credit support. The final rule will allow market participants to each provide up to $20 million in cash as credit support in the National Electricity Market (NEM).
The final rule will allow cash to be provided as credit support
In the NEM, participants are required to provide credit support to AEMO if they are a net debtor (typically retailers). This allows AEMO to manage financial risks in the event that a participant defaults and is unable to pay any outstanding settlement.
Under the existing arrangements, participants need to obtain bank guarantees and letters of credit in forms acceptable to AEMO for credit support.
The final rule will allow participants to provide cash as credit support to AEMO, enable a new option to provide credit support without relying on a third-party. This increased optionality and flexibility will enable reductions in credit support costs for participants, in addition to reducing risks of participants failing to provide credit support.
We expect that small retailers are likely to benefit most from the final rule, as they typically have higher financing costs and lower access to credit support.
The final rule will reduce and manage risks
Allowing cash to be provided as credit support introduces potential clawback and insolvency-related risks. A market participant that uses cash as credit support, but becomes insolvent, could lead to a liquidator seeking to clawback that cash. If a clawback were to occur, this would create a shortfall which the market would need to bear.
- The final rule will reduce and manage these risks using several layers of protection, including:
limiting the amount of cash each participant can provide as credit support to $20 million - seeking to clarify that cash credit support will within the Corporations Act displacement provisions in the National Electricity Law (NEL)
- granting AEMO a first ranking charge, return rights, and set off rights over cash provided as credit support
- avoiding financial exposure to AEMO by allocating any potential costs to participants receiving net payments.
The final rule will also enable earlier distribution of delayed credit support payments
Under the current arrangements, any credit support payments not received by AEMO within a short time period are distributed to participants at the end of financial year. This could leave participants short paid for up to 12 months.
The final rule seeks to minimise any such impacts by enabling a more timely distribution of any delayed credit support payments. AEMO will distribute any delayed credit support payments to any short-paid participants through the routine revised statements, the earliest of which will be issued 20 business days following the end of a billing period.