Australian electricity and gas markets – July 2025 Update

Highlights for June 2025

In this update, we take a look at the latest rule changes and market updates published in June 2025, which affect participants in the Australian electricity and gas markets.

What you need to do

• Stakeholders should note the market updates below, and note any impacts on their compliance obligations.

National Electricity Rules

Final Rules – Cash Credit Support

On 26 June 2025, the Australian Energy Market Commission (AEMC) published a final determination expanding the credit support options available to participants in the National Electricity Market (NEM).

The final rule will allow participants to provide up to $20 million each in cash as credit support, in addition to existing bank guarantee and letter of credit options. The new cash option allows participants to provide cash as credit support directly to the Australian Energy Market Operator (AEMO), which avoids reliance on third-party lenders and reduces the risk of administrative delays.

Small and prospective retailers are expected to benefit the most, as they typically have higher financing costs and limited access to capital. During the consultation phase, the AEMC responded to stakeholder feedback by increasing the proposed cash limit from $5 million in the draft rule to $20 million in the final rule.

The final determination also includes multiple layers of legal protection to prevent cash from being reclaimed if a participant becomes insolvent, and allows AEMO to distribute any delayed payments to other participants more efficiently.

The final rule commences on 1 November 2026.

Draft Determinations – No Inertia Trading Market to be established

On 26 June 2025, the AEMC released a draft determination proposing not to make a rule to introduce an inertia trading market. The draft determination is in response to the Australian Energy Council's request for a real-time market to trade inertia – the grid stability service that prevents blackouts when big generators trip.

While operational procurement of inertia may offer value in the future, the AEMC determined that implementation is not justified at this time, as there are no material net market benefits under current assumptions.

The draft determination focuses on improving the application of existing frameworks and supporting targeted technical work to ensure readiness for operational procurement of inertia should system conditions change in the future.

Feedback on the draft determination closes 7 August 2025.

Rule Change Request – allocation of IRSR in transmission loops

On 19 June 2025, the AEMC published a directions paper seeking feedback on a rule change request from AEMO proposing a new method for allocating inter-regional settlements residue (IRSR) in transmission loops. The proposed approach would involve deducting negative IRSR from positive IRSR on the looped interconnectors in each dispatch interval, before calculating settlements residue distribution unit payouts This change in approach a result of consultation and issues associated with comments from TNSPs in managing the settlement residues..

Submissions are due by 10 July 2025, and final determination is expected in September 2025.

We understand that industry is opposed to the revised IRSR arrangements, arguing that they will increase consumer costs, reduce the effectiveness of SRA units as hedging tools, and negatively impact inter-regional trade and Transmission Network Service Providers (TNSP) cashflows.

Consultation Papers – Gas connections & non generating units providing system security

The AEMC is requesting consultation on the following papers:

• Updating the regulatory framework for gas connections rule change request consultation paper. Submissions are due by 10 July 2025.
• Clarifying registration for non-generating units providing system security services consultation paper. Submissions are due by 3 July 2025.

National Energy Retail Rules

Final Rules – Hardship Customers

On 19 June 2025, the AEMC made a more preferable final retail rule for the assisting hardship customers rule change.

This decision was made in response to a rule change request submitted by the Hon. Chris Bowen MP, Chair of the Energy and Climate Change Ministerial Council, with the aim of increasing support for people experiencing hardship.

The final rule comprises three key components:

• Introduction of a new principle: Retailers are now subject to a direct and explicit obligation to ensure that hardship customers are not worse off than the deemed better offer available to them.
• Enhanced retailer obligations: The National Energy Retail Rules have been amended to require retailers to proactively inform hardship customers, both at the outset and on an ongoing basis, if a better offer is available.
• Additional hardship program indicators: New indicators have been introduced, requiring both retailers and the Australian Energy Regulator (AER) to report on these measures in the AER’s annual retail market report.

Schedule 2 of this Rule commences operation on 26 June 2025 and Schedule 1 of this Rule commences operation on 30 December 2026.

Further to the above rule change, on 19 June 2025 the AEMC announced major new reforms that are aimed at delivering stronger protections for energy consumers, and to help more households access better energy deals.

The final determination consolidates four of the seven consumer package rule change requests into one rule change process. The improving consumer confidence in retail energy plans final rule will:

• protect customers on contracts with benefits that change or expire from paying more than the standing offer once the benefits end;
• improve protections for customers on contracts with unreasonable conditional discounts by requiring the retailer to remove the conditionality of the discount and apply the discount in full;
• restrict retailers from increasing prices in market retail contracts more than once in 12 months;
• prohibit fees (excluding network charges) for vulnerable consumers and limit fees to reasonable costs for all other consumers;
• require retailers to inform their customers about these changes; and
• provide retailers with just over 12 months to comply with the rule.

Draft Rules – Customers switching plans and retailers

On 19 June 2025, the AEMC made a more preferable draft retail rule to improve customers' ability to switch to a better offer. The draft determination seeks to increase the number of customers who switch by:

• increasing visibility of the potential savings customers can access through switching to a new offer with their retailer; and
• engaging customers on more expensive plans to switch to cheaper deals, and improving competition in the market.

Stakeholders are invited to make their submissions on the draft determination until 31 July 2025.

Other Updates

2026 Reliability Standard and Settings Review

On 19 June 2025, the Reliability Panel published an issues paper to initiate the 2026 Reliability Standard and Settings Review (2026 RSSR). The purpose of this review is to determine the level of reliability that customers value, known as the reliability standard. This standard is then implemented through market settings. The Panel will undertake an extensive modelling exercise to determine the appropriate levels for the standard and each market setting.

The Panel is seeking stakeholder feedback on the key considerations for setting the reliability standard and the market price settings that will apply from 2028 to 2032. Submissions are due by the 17 July 2025.

Reliability & Security Report

On 26 June 2025, the Reliability Panel released its NEM Reliability & Security Report FY24. The five key insights from the Report are:

• Reliability maintained: the NEM continued to deliver high levels of reliability with no breaches of the reliability standard or interim reliability measure in FY2024.
• Security challenges persist: system security remains a pressing challenge as the energy transition accelerates, requiring ongoing focus on essential system services.
• Battery growth accelerating: both distributed and utility-scale battery capacity is increasing rapidly, with effective orchestration and price signals needed to deliver greater customer and system benefits.
• Price patterns evolving: wholesale electricity price patterns are changing as the energy mix transforms.
• Safety record strong: no safety incidents occurred in the reporting period that are within the scope of the Panel's reporting.

Department of Climate Change, Energy, the Environment and Water - National Energy Equity Framework

On 10 June 2025, the National Energy Equity Framework was published by the Department. The Framework aims to ensure that energy policies don't unintentionally disadvantage any type of consumer. It provides models, tools and guidance for both government agencies and market bodies.

To guide implementation of the Framework, Ministers agreed to establish a community of practice across governments which will include consumer advocates and other key stakeholders.

Gas market Review

On 30 June 2025, the Australian Government announced they were conducting a joint review of gas market regulation. This joint review includes the Australian Gas Security Mechanism, Gas Market Code and the Heads of Agreement with east coast liquefied natural gas exporters.

This review will focus on key market gas issues and will examine:

• the effectiveness of current policies and regulations;
• whether the regulatory interventions remain suitable;
• opportunities for streamlining and consolidating the regulatory approach; and
• alternative approaches to address current challenges.

Stakeholders are encouraged to make submissions in response to the Consultation Paper. Submissions are due by 5:00pm on 15 August 2025.

South Australia – Firm Energy Reliability Mechanism

The Firm Energy Reliability Mechanism (FERM) is a policy framework developed by the South Australian Government to ensure that the state maintains sufficient long duration firm capacity – that is, electricity generation assets capable of reliability supplying power for at least eight continuous hours and at a scale greater than 30 megawhatts. FERM is designed to underpin the reliability, resilience and affordability of South Australia's electricity supply as the state transitions to a power system dominated by renewable energy sources.

FERM operates by setting a Firm Energy Target (FET) through an annual assessment of the state’s needs (the Firm Energy Requirements Assessment, or FERA). This target prescribes the amount of long duration firm capacity required to manage risks to energy reliability, taking into account factors such as forecast demand growth, generator retirements, and the variability of renewable energy sources. To meet this target, eligible generators participate in competitive tenders for contracts that underwrite a portion of their revenue, providing them with the financial certainty needed to remain in or enter the market.

The Stage 2 consultation provides an opportunity for stakeholders to give further feedback. Consultation closes on 14 July 2025 and interested stakeholders are invited to provide submissions here.

We have previously reported on the National Electricity Market wholesale market settings review that has been commissioned by the Federal Government. It will deal with issues that are expected to be managed under the FERM and it raises the question as to whether the FERM process should be delayed and then co-ordinated with the outcomes of the review.

Authors: Dan Brown, Partner; Dale Gill, Partner; Paul Newman, Consultant; Savannah Tindiglia, Graduate and Isabella Skene, Paralegal.