Australian electricity and gas markets – April 2026 Update 

Highlights for March 2026

In this update, we take a look at the latest rule changes and market updates published in March 2026, which affect participants in the Australian electricity and gas markets.

What you need to know

The reform agenda continues to roll forward. We have highlighted the many reforms published in March that affect the energy sector.

The big news is:

• Connection of data centres to the grid is to become much more complex and costly; and
• The NEM Review Implementation apparently remains on track (but still not in Queensland).

Connection of data centres to the grid to become much more complex and costly

The AEMC is targeting the connection of data centres (and other large inverter based loads) to the national grid and imposing significantly more onerous obligations on the connection.

• They will need to meet significantly more onerous "access standards".
• The connection process will be managed by AEMO and the network owners using the processes under clauses 5.3.4A (access standards) and 5.3.4B (system strength) of the NER, which have caused significant delays, additional costs and uncertainty for developers of renewable generators and batteries over the last 10 years.
• The commissioning of the plant will become far more complex. It will be subject to the hold point testing regime to test compliance with performance standards. These processes have caused significant delays and additional costs for developers of renewable generators and batteries.

NEM Review Implementation

Implementation of the NEM Review recommendations remains on track (but still not in Queensland). The Department of Climate Change, Energy, the Environment and Water has confirmed:

• South Australia will implement the MMO in July 2026;
• The industry-led contract co-design process will commence in Q2 2026 and the outcomes will be formalised in the National Electricity Law and Rules over the course of 2026; and
• Detailed policy design for the ESEM is underway with the aim of holding the first ESEM tender by the end of 2027.

National Electricity Rules

Consultation paper - Enhancing transparency and clarity in system security frameworks

On 12 March 2026, the Australian Energy Market Commission (AEMC) published a consultation paper seeking feedback on two rule change requests relating to the current frameworks for system security in the National Electricity Market (NEM).

The two rule change requests are as follows:

• The Australian Energy Market Operator (AEMO) submitted a rule change request on 17 November 2025 seeking to enhance the system strength, inertia and network support and control ancillary services (NSCAS) frameworks.
• The Australian Energy Council (AEC) and Clean Energy Council (CEC) submitted a rule change request on 12 January 2026 seeking to strengthen accountability and transparency in security frameworks.

The rule change requests raise issues about the effective operation of the current frameworks while the power system is in a period of rapid change. Changes in network configuration, generation mix or operating conditions may materially alter the required security services.

The requests address the following:

• Timing and process limitations may be hindering transmission network service providers (TNSPs) in delivering assets within required timeframes.
• Flexibility is required so frameworks can incorporate new technologies as they emerge.
• The lack of clarity in roles, security requirements, and procurement processes across the security frameworks causes uncertainty for investors in security services.

The rule change requests are a part of a range of programs on supporting system security through the energy transition, such as the AEMC's (in-progression) National System Security Action Plan.

Submissions are due 16 April 2026.

Draft determination and draft rule - AEMC proposes new grid standards for data centre connections

On 12 March 2026, the AEMC released a draft determination and draft rule, being the Draft National Electricity Amendment (Improving the NEM access standards – Package 2) Rule 2026, proposing new technical standards for large inverter based loads such as data centres connecting to the NEM. There is a concern that with the rapid growth of Australia's data centres comes unclear technical standards, and as a result grid stability could be adversely impacted.

The AEMC says the draft rules propose three key changes:

• A clearer framework for defining and classifying large inverter-based loads (including data centres), which would determine when and to whom the technical connections standards apply. The draft rule would raise the current threshold for large inverter-based loads from 5 MW to 30 MW and embed this definition directly in the NER. This would make it so stricter technical requirements apply only to those most likely to affect power system security.
• Data centres would need to meet specific disturbance ride-through requirements, staying connected during voltage and frequency disturbances and recovering power within defined timeframes. These standards are based on actual plant capabilities and grid needs.
• Alignment with global practice, such as largely matching the standards proposed or used in Texas, Ireland, and Finland. Data centre operators could then use the same equipment and feasibility studies as they do elsewhere. This standardised approach would mean faster deployment, lower costs, and better investment certainty.

The AEMC has "glossed over" some key implications for the large inverter based loads:

• The connection of this plant will be far more complex as they are subject to the processes under clauses 5.3.4A (access standards) and 5.3.4B (system strength) of the NER. The application of these provisions by AEMO and NSP processes have caused significant delays, additional costs and uncertainty for developers of renewable generators and batteries over the last 10 years.
• The commissioning of the plant will become far more complex. This plant will be subject to the hold point testing regime to test compliance with performance standards. This process has also caused significant delays and additional costs for developers of renewable generators and batteries.

AEMO will be publishing interim guidelines in the coming months to help stakeholders prepare for the new standards.

Submissions close on 7 May 2026. A final rule is expected to be published in mid-2026.

Rule change request - Small changes to Integrating Price-Responsive Resources rule

On 19 March 2026, the AEMC initiated an expedited process for a rule change request submitted by AEMO on 17 February 2026. The rule change request is seeking to make small changes improving the operation of the Integrating Price-responsive Resources rule.

The five proposed changes are to:

• make VSR Incentive Mechanism payments and cost recovery monthly
• delay transitional rules to consider VSR eligibility for Frequency Performance Payment
• include VSRs in the definition of minimum ramp rate requirements
• align VSR non-conformance requirements with other scheduled resources
• clarify the treatment of deactivated and hibernated VSRs for ancillary services.

Submissions for feedback close 16 April 2026.

Consultation paper - Improving compensation frameworks

On 19 March 2026, the AEMC released a consultation paper seeking feedback on a rule change request aimed at improving compensation frameworks. AEMO submitted the request on 27 November 2025. The proposed major changes include:

• introducing a formal objective for directions compensation;
• changing the calculation and cost recovery of compensation claims;
• changing the compensation governance and process; and
• aligning compensation frameworks by re-structuring the NER.

AEMO considers that the rule change will provide confidence to market participants about appropriate compensation during times of market stress, and to stakeholders that the electricity system will continue to operate despite disruption, as well as reducing the cost and effort of the claims process.

Submissions are due 30 April 2026.

National Gas Rules

Directions Paper - AEMC proposes gas network regulatory reforms

On 19 March 2026, the AEMC released a Directions Paper proposing updates to the rules that govern how gas distribution networks are regulated. As household and small business energy choices shift, such as customers leaving the gas network, the updates the AEMC are proposing ensure the regulatory framework keeps pace.

The proposal is a balanced package of targeted reforms across four areas of the National Gas Rules (NGR):

• A longer-term outlook: Requiring service providers and the regulator to demonstrate how they have considered long-term energy transition risks.
• Capital cost recovery tools: Providing clearer guidance to support efficient recovery of past network investments, spreading costs more evenly between current and future customers – and ensuring customers are not paying for assets they are no longer using or are expected to use in the future.
• Capital and operating expenditure: Strengthening provisions to minimise expenditure, to better align investment decisions with uncertain demand conditions while ensuring safe and reliable services.
• Tariff design: Enhancing guidance on how reference tariffs are designed so they remain economically efficient and better reflect consumer impacts across a range of transition scenarios.

A public forum is being held on 9 April 2026, with stakeholder registration available here.

Submissions for stakeholder feedback are due 30 April 2026.

Consultation paper - Allowing AEMO to accept cash as credit support

On 26 March 2026, the AEMC published a consultation paper to seek stakeholder views on allowing AEMO to accept cash as credit support in the NGR in response to a rule change request from Delta Electricity.

In the NGR, Market Participants in the Declared Wholesale Gas Market (DWGM) and Trading Participants in the Short Term Trading Market (STTM) are required to provide an acceptable form of financial security to AEMO. This provides financial assurance to AEMO in case a participant defaults. Currently, the only acceptable forms of security are bank guarantees or another immediate, irrevocable and unconditional commitment in a form acceptable to AEMO.

Delta Electricity identified that this requirement could be restrictive for Market and Trading Participants that are unable to obtain such guarantees, and submitted a rule change request on 28 July 2025 to allow AEMO to also accept cash as credit support.

Delta considers that while participants did not face barriers in obtaining bank guarantees historically, there has been an increasing trend of financial institutions no longer providing credit support to participants with exposure to fossil fuels, for example coal and gas-fired electricity generation and coal mining. Delta perceives a real risk that a market participant, while being a profitable and solvent business, may be unable to provide credit support to AEMO.

Submissions to the consultation paper close 30 April 2026.

National Energy Retail Rules

Draft determination and draft rule - AEMC proposes improvements to life support customer processes

On 5 March 2026, the AEMC released a draft determination to improve the existing processes of retailers and distributors in registering and serving customers with life support equipment at their households.

SA Power Networks and Essential Energy submitted the rule change request on 23 August 2024 following the Energy Charter's #BetterTogether Life Support Customer initiative and consultation.

The draft rule proposes several improvements to how energy retailers and networks register and communicate with life support customers:

• Better communication: Customers can choose how they're contacted about planned outages (SMS, email or letter) and nominate an emergency contact person to be notified.
• Streamlined registration: Retailers will manage all registration and deregistration (rather than splitting responsibility with networks), making it clearer who customers should contact. All retailers will use the same standardised medical form.
• Regular check-ins: Retailers must conduct annual check-ins to ensure customer details remain accurate and life support is still required.
• Clearer deregistration: Faster deregistration when customers request it, with new penalties for retailers who fail to comply.
• Better information for networks: Medical practitioners (doctors or specialists) can indicate if a customer has life-threatening energy needs, giving networks information to plan for outages more effectively while maintaining the same protections for all life support customers.

Feedback is open until 16 April 2026, with a final decision expected in June 2026.

Consultation opens on the review of the Retailer of Last Resort Guidelines

On 18 March 2026, the AER published a consultation paper seeking feedback on the Retailer of Last Resort (RoLR) guidelines and plan, including:

• changes to the cost recovery guidance, timing and template
• approach to taking up to 72 hours to designate an additional RoLR
• approach to designated contracts and timeframe
• additional data requirement

The AER is seeking submissions until 17 April 2026.

Other updates

AER releases Draft Default Market Offer 2026-27

On 19 March 2026, the AER released the draft decision on the Default Market Offer (DMO) for 2026-27.

The price determination applies to residential and small business customers across New South Wales, South East Queensland and South Australia. The DMO caps the prices a retailer can charge a standing offer customer and also serves as a comparison price for market offers in these regions.

The draft decision proposes reductions in DMO prices across all regulated regions, driven largely by lower wholesale electricity costs and reduced environmental and retail operating costs.
If adopted in the final determination, DMO annual prices for residential customers would fall by between 1.3% and 10.1%, while small business prices would decrease by between 7.6% and 21.2%, depending on the region.

The draft determination is open for consultation until 9 April 2026.

AER releases draft 2026-28 Annual Information Orders for Consultation

On 25 March 2026, the AER released draft Annual Information Orders for 2026-27 and 2027-28 for public consultation with the intent to replace the Orders currently in place for those reporting years with improved processes for electricity network businesses.

The Orders impose annual reporting obligations on regulated electricity distribution networks, transmission networks, and interconnectors.

The changes aim to reduce the volume and complexity of issues arising in future information reporting processes. The proposed updates:

• clarify ambiguous requirements
• rectify information specification errors
• update definitions in the glossary
• address issues requiring an exemption from the current Orders
• help streamline the reporting process by minimising the need for additional guidance

Submissions are open until 11 May 2026.

AER initiates review of the Forecasting Best Practice guidelines

On 25 March 2026, the AER commenced a targeted review of the Forecasting Best Practice guidelines and published the proposed amendments for consultation.

The Forecasting Best Practice guidelines set out requirements for AEMO's forecasting for reliability assessments and the Integrated System Plan (ISP).

The review proposes the following changes to the guidelines:

• improving efficiency of processes for AEMO to follow in producing compliance reports for the release of an ISP methodology and Inputs, Assumptions and Scenarios Report (IASR) in close succession, specifically:
  • extending the period in which AEMO must prepare their compliance reports
  • allowing AEMO to request an extension to this period
  • allowing AEMO to consider combining the compliance reports.
• alignment with updated definitions and features from the AEMC rule changes.

Submissions are open until 24 April 2026.

2026 Victorian Gas Planning Report Update

On 26 March 2026, AEMO released the 2026 Victorian Gas Planning Report Update. The Update provides information about the supply demand balance over the next five years in Victoria and the Victorian Declared Transmission System.

Some key points in the update include:

• Victoria’s annual production forecast remains relatively similar to the 2025 Update, and from 2029, Victoria is projected to become a net importer of gas as Victorian consumption exceeds Victorian production
• Victorian annual production is forecast to decline by 52.8% over the five-year outlook period, from 242 petajoules (PJ) in 2026 to 114 PJ in 2030, and to reduce to 9 PJ by the end of 2035
• annual Victorian system consumption is forecast to reduce by 10.5% over the outlook period, consistent with the 10.7% reduction forecast in the 2025 Update
• Victoria’s maximum daily supply capacity (including storage facilities) is projected to decline by 27.3% in the five-year outlook period, falling from 1,969 terajoules per day (TJ/d) in 2026 to 1,431 TJ/d in 2030

2026 Gas Statement of Opportunities

On 26 March 2026, AEMO released the 2026 Gas Statement of Opportunities (GSOO) for Australia's East Coast Gas Market. The publication forecasts the adequacy of gas supplies in central and eastern Australia, based on information provided by gas industry participants, to meet households' and businesses' changing energy needs to 2045.

The GSOO shows improved near-term supply conditions, with risks of extreme peak-day shortfalls in southern Australia now expected to emerge a year later than previously forecast, and new investment required from 2030 onwards.

Total gas consumption is forecast to decline as households, businesses and industry electrify, reducing their reliance on gas. In the NEM, gas‑powered generation demand is also expected to fall below previous forecasts, driven by around 30 gigawatts of battery storage under development and the delayed retirement of the Eraring Power Station.

Despite improved peak-day supply expectations, gas production from legacy fields in southern states is forecast to decline by 46% over the next five years. This will require new investments to address emerging supply gaps from 2030 under most weather conditions.

NEM Review

In March 2026, all NEM jurisdictions except Queensland agreed on how to address the rest of the review’s recommendations. The details are available in the document, National Electricity Market Wholesale Market Settings Review (NEM Review) Recommendations – Implementation Pathways.

This document confirmed the following key items:

• South Australia will implement the MMO through the National (South Australia) (Firm Energy Reliability and Orderly Exit Management) Regulations 2025, before transitioning to a national approach in 2027 following required legislative amendments;
• The industry-led contract co-design process will commence in Q2 2026. This interim co-design process will be convened by the NEM Review Implementation Taskforce, AusEnergy Services Limited (ASL) and the AER. The enduring industry-led co-design process will be formalised in the National Electricity Law and Rules, as appropriate, over the course of 2026.
• Detailed policy design for the ESEM is underway in collaboration with NEM jurisdictions. This will inform a draft legislative package for endorsement and stakeholder consultation, with the aim of holding the first ESEM tender by the end of 2027.

Wholesale Electricity Market (WEM)

Electricity System and Market Rules

Final Determination – 2026 Benchmark Reserve Capacity Prices for the 2028/29 capacity year

On 13 March 2026, the ERA published its final determination for the Benchmark Reserve Capacity Prices (BRCPs) to apply in the 2028/29 Reserve Capacity Year. AEMO will use these BRCPs to determine the price paid to capacity providers in the WEM.

The ERA has determined both the Peak Benchmark Reserve Capacity Price and Flexible Benchmark Reserve Capacity Price to be $488,500 per Megawatt (MW) per year, which is 35% higher than the 2025 BRCP of $360,700 per MW per year. The increase is due to using a longer duration battery energy storage system as the Benchmark Technology, significant increases in labour, materials and freight costs, as well as the new Fixed Capital Charge ($100,000 per MW) that is expected to be in place by 1 July 2026. The Fixed Capital Charge will be used to cover the costs for shared network transmission assets (for new and upgraded generation and load connections over 10 MW in size).

The 2026 BRCP values came into effect on 16 March 2026 and will apply to the 2028/29 Reserve Capacity Year.

Procedure Change Proposal – WEM Procedure: Settlements

On 16 March 2026, AEMO published a Procedure Change Proposal to propose amendments to the WEM Procedure: Settlements. The proposal seeks to update the way in which AEMO distributes civil penalty amounts following changes to the ESM Rules that came into effect on 1 January 2026, specifically to require that civil penalties are distributed in accordance with instructions provided by the ERA.

Submissions in response to this Procedure Change Proposal are due via email to WA.Marketdevelopment@aemo.com.au by 16 April 2026 using the provided Procedure Change Submission form.

Final Rule Change Report - Supplementary Reserve Capacity Amendments (RC_2025_01)

On 17 March 2026, the Coordinator of Energy published his Final Rule Change Report for Rule Change Proposal RC_2025_01.

The Rule Change Proposal submitted by Bluewaters Power proposed a change to the eligible sources of supplementary capacity that are Eligible Services under clause 4.24.3 of the ESM Rules. The proposal sought to allow the production of electricity by Energy Producing Systems that are Registered Facilities – and for which the relevant Market Participant applied for certification in the current Reserve Capacity Cycle but were not awarded Capacity Credits – to participate in the supplementary capacity process in the Capacity Year for which they did not receive Capacity Credits.

The Coordinator’s final decision was to reject the Rule Change Proposal on the basis that it was inconsistent with the State Electricity Objective. For a more detailed explanation of the Coordinator's reasons, see section 2.1 of the report.

Draft Determination – Frequency Co-optimised Essential System Services Offer Price Ceilings 2026

On 23 March 2026, the ERA published its draft determination of the Frequency Co-optimised Essential System Services (FCESS) Offer Price Ceilings, which cap the price of FCESS offers in the Real-Time Market. The ERA has employed a new method to calculate the FCESS Offer Price Ceilings based on real market data and operational information of the FCESS markets.

The proposed FCESS Offer Price Ceilings in the draft determination are:

The ERA is also proposing to remove the process of rounding up to the nearest $50 per MW per hour for newly indexed FCESS Offer Price Ceilings and to instead round up to the nearest $1 per MW per hour.

Submissions on the draft determination are due by 21 April 2026.

Other updates

Community Benefits Guideline: Realising the Opportunities of the Energy Transition

In early March 2026, PoweringWA released the Community Benefits Guideline for Large-scale Renewable Energy Projects in the South West Interconnected System (SWIS).

The Guideline provides a clear framework for effective community benefit arrangements, recommending firm dollar-per-megawatt figures for new grid-connected wind, solar, and Battery Energy Storage System projects connected in the SWIS. These figures balance the commercial priorities of industry with the need for projects to deliver meaningful and lasting benefits to local communities.

While compliance with the Guideline is currently voluntary, it is incentivised through eligibility under the Capacity Investment Scheme. The State Government has indicated an intention to mandate these standards in the future if necessary.

Authors: Dan Brown, Partner; Kate Phillips, Partner; Dale Gill, Partner; Paul Newman, Consultant; Aylin Cunsolo, Partner; Lauren Zambotti, Counsel; Taylah Smith, Graduate; Elisabeth Gregory, Graduate and Jenna Matus, Paralegal.