Shortening the Settlement Cycle (SSC)

Background

In December 2023 Globird Energy submitted a rule change request to shorten the settlement cycle from 20 to 11 business days following the end of a trading week. The AEMC has progressed this rule change request and on 8 August 2024 published a draft determination and draft rule titled Shortening the Settlement Cycle. The changes intend to reduce prudential collateral held by AEMO to cover accrued liabilities (typically of retailers) in the NEM, i.e. unpaid settlement amounts. The draft determination indicates that lower working capital requirements for small retailers in particular would lower barriers to market entry and support increased investment in service innovation and more competition. This should benefit consumers through access to more choice and better service offerings.

High-Level Implementation Assessment (HLIA)  

A High-Level Implementation Assessment has been produced as the first stage of AEMO’s SSC reform implementation process under the NEM Reform Program. It provides an indicative and preliminary view to participants on how the SCC draft rule may be implemented by AEMO. It outlines the proposed system, data exchange, process and operational changes and the indicative timeline that would likely be required to give effect to the draft SSC rule. This HLIA also provides a general assessment of what these changes may mean for NEM participants.

AEMO welcomes any stakeholder feedback on this SSC Draft HLIA by Monday, 14 October 2024. Feedback by Monday 30 September will be used to inform AEMO’s submission to the AEMC rule change. Comments should be sent via email to NEMReform@aemo.com.au. A response template is available for stakeholders to use.

Any feedback or submissions related to the rule change or draft determination should be provided to the AEMC as part of its rule change process.

Implementation pathways

In the HLIA, AEMO has identified three pathways to implementation which result in material differences to the requirements for implementation. The AEMC is seeking stakeholder feedback via submissions to its draft determination for the Shortening the settlement cycle rule change by 3 October 2024. As part of your submission, the AEMC encourages you to consider the pathways outlined in AEMO’s draft high-level implementation assessment and provide feedback on those options. This will contribute to the AEMC’s understanding of the potential impacts of the proposed options and will be considered when making a final decision. Further information on the rule change process can be found here.

AEMO intends to publish an update to this HLIA in December 2024 to:

• Align with the AEMC’s final SSC rule.
• Accommodate industry feedback where appropriate.
• Provide further, more detailed information on the SSC implementation impacts and pathway.

Industry engagement

This initiative forms part of NEM Reform Program and market participants can get involved by visiting:

Further information

For more information, please contact NEMReform@aemo.com.au.