On 27 August 2026, the Australian Energy Market Commission made a final determination and final rule in response to two consolidated rule change requests submitted by Grids Energy Pty Ltd (proponent). These are: 

• ERC0359 - Optimising contingency size in dispatch
• ERC0360 - Allocating contingency FCAS costs

The final rule, which is a more preferable rule, seeks to:  

• formalise the requirement for the Australian Energy Market Operator (AEMO) to use reasonable endeavours to co-optimise the size of the largest credible contingency, in central dispatch  
• require AEMO to set out in the constraint formulation guidelines how it will perform co-optimisation of the largest credible contingency  
• introduce a requirement for AEMO to report on the instances in which contingency size co-optimisation constraints are applied and, where applicable, AEMO's assessment of the extent of co-optimisation.  

In response to stakeholder feedback, the Commission has made a minor amendment to the draft rule to focus AEMO's quarterly reporting on the extent of co-optimisation over time rather than attempting to quantify the impact of individual instances. The Commission considered that estimating impacts would impose significant reporting burden on AEMO, requiring detailed counterfactual analysis, without benefits commensurate with the cost. The final rule does not make any other substantive changes to the draft rule. 

The final rule formalises arrangements to co-optimise the size of the largest credible contingency

AEMO currently co-optimises the size of the largest credible contingency in dispatch under the circumstances set out in its constraint formulation guidelines. AEMO undertakes this practice in accordance with its obligation under the NER clause 3.4.1(a) to maximise the value of spot market trade.

While the Commission considers that greater use of co-optimisation could improve FCAS price efficiency in some circumstances:

• the benefits of expanding AEMO's current approach are likely to be modest and concentrated in a limited number of dispatch intervals
• there are material implementation costs and operational risks associated with developing and maintaining additional constraints
• there remains uncertainty regarding the extent to which broader application of co-optimisation would improve market efficiency over time.

The Commission considers that the final rule is a proportionate response to the issues raised by stakeholders.  

The Commission has also decided not to make any changes to the existing cost recovery arrangements at this time 

The Commission considered the merits of more cost‑reflective recovery arrangements that seek to improve incentives for participants to consider the capacity size of their investments on the volume of contingency FCAS procured, including the runway and alternative cost recovery approaches. However, on balance, the Commission considers that, in practice, such reforms would be complex to implement and are unlikely to produce material benefits for consumers. All stakeholders who commented on cost recovery arrangements supported the Commission's draft determination to not make any changes to these arrangements. 

The Commission proposes a staged implementation approach for the final rule 

The final rule will be implemented on a staged basis to align with AEMO’s existing reform priorities, as follows:

• provisions clarifying the requirement for AEMO to use reasonable endeavours to undertake co‑optimisation will commence on 4 September 2026
• new transparency and reporting obligations will commence on 1 October 2027, allowing sufficient time for system build, automation and consultation
• the transitional arrangements will require AEMO to complete a review of the constraint formulation guidelines by 1 October 2028.