What you need to know
During July and early August we witnessed key new developments that will result in significant impacts on the sector.
The big ticket items are:
- Data centres come under significant scrutiny and will be subject to proposals regulating their development and energy usage.
The AEMC has set the agenda in its advice to government, recommending four key changes:- Use only clean energy.
- Prove they're covered by showing their demand is backed by new firm capacity.
- Register and play by market rules by becoming registered market participants.
- Connection agreements would encourage data centres to shift demand (and Minister Bowen has made it clear they must pay their own way on connections).
- Auto-bidders come under scrutiny
The AER compliance bulletin on automated bidding and third-party services delivers key messages:- Automation can assist, but it does not dilute NER responsibility — bids and rebids still need to be compliant whether made manually, by in-house software, or through a third-party provider.
- Third-party providers may face liability where they are directly or indirectly concerned in, or party to, a participant’s breach.
- Changes to ESM Rules foreshadowed to improve the operation of the Electric Storage Resources (ESR) in the Reserve Capacity Mechanism
The Consultation Paper published by the Department of Energy and Economic Diversification includes several proposals to amend the ESM rules, including:- Empowering AEMO to set a minimum state of charge level for the ESR fleet.
- Changing DSP availability window.
- Options to ensure ESR operators can comply with the Lack of Reserve – State of Charge condition and other related obligations.
Highlights for July 2026
In this update, we take a look at the latest rule changes and market updates published in July 2026 which affect participants in the Australian electricity and gas markets.
National Electricity Rules
Minimum System Load framework and floor price proposal
On 9 July 2026, the Australian Energy Market Commission (AEMC) published a single consultation paper on two rule change requests proposing changes to the National Electricity Rules (NER) to better manage Minimum System Load (MSL).
The continued growth of consumer energy resources (CER), including rooftop solar, is leading to new challenges for the operation of the National Electricity Market (NEM). One such challenge is MSL, where the aggregate contribution of rooftop solar generation offsets underlying consumer demand. This reduces the demand for electricity from grid-scale generation.
The AEMC Reliability Panel submitted one rule change request and the Clean Energy Council (CEC) submitted the second.
- The Panel proposed the introduction of an MSL governance framework and floor price proposal.
- The CEC proposed the introduction of an MSL reserve service through which any responsive load could bid to provide dispatchable reserves for use by AEMO to increase demand during forecast MSL periods. This would include utility Battery Energy Storage System (BESS), pumped hydro and behind-the-meter resources.
Submissions are due by 20 August 2026. A draft determination is planned for 3 December 2026.
Enhancing distribution network planning & reporting
On 16 July 2026, the AEMC published a final determination and a more preferable final rule in response to a rule change request from Energy Consumers Australia to enhance distribution network planning and reporting. The final rule:
- replaces the annual planning process with a longer-term Distribution Network Development Plan (DNDP), supported by an annual update; and
- implements a separate framework for distribution network data reporting.
Like the rule change requests above from the AEMC Reliability Panel and the CEC, this change is also in the context of challenges emerging from the increased uptake of CER. The AEMC considers that this final rule will improve visibility of future network needs, anticipated constraints and opportunities for investment and innovation across distribution networks.
The rule commences in stages, from mid-July 2026 to early 2032.
Compliance bulletin – Automated bidding and utilisation of third-party services
On 5 August 2026, the AER released a compliance bulletin on automated bidding and third-party services, directed at electricity market participants using auto-bidding software and outsourced providers in wholesale market operations. The AER's central message is: automation can assist, but it does not dilute NER responsibility — bids and rebids still need to be compliant whether made manually, by in-house software, or through a third-party provider.
Key takeaways:
- Automated bids sent directly to AEMO are considered higher risk where the participant cannot verify or adjust the bid before submission. Participants should ensure they have appropriate risk mitigation and management processes in place to ensure any utilisation of auto-bidding complies with all legislative obligations.
- Vendor governance needs to be much more than procurement hygiene: The AER expects diligence on the provider’s practices, software, legislative-update process, monitoring/audit arrangements and contingency planning.
- Third-party providers are not outside the frame: They may face liability where they are directly or indirectly concerned in, or party to, a participant’s breach.
- Record-keeping is becoming a systems-design issue: Automated logs should capture the inputs, decision logic and outputs of each bidding decision to meet the requirements to be provided as a contemporaneous record. System-generated logs must ensure that the necessary information is being generated, captured and retained in accordance with the NER.
In practical terms, participants should be asking not only “does the auto-bidder work?”, but also “can we evidence why it acted, who had access to influence it, whether its logic remained compliant, and what we would do if the provider or tool failed?”.
The bulletin has no legal force but is a useful indicator of potential regulation to come. Notably, auto-bidding was flagged in the NEM Review as a key area that required more regulation and the AER issued a consultation paper earlier this year to rewrite the Rebidding and Technical Parameters Guideline, which proposed extending the guidelines to apply to the use of auto-bidders in providing rebids.
Data Centre Advice and Reforms
A number of rule changes and reforms regarding data centre growth were progressed by the AEMC and other industry participants during July.
- Operational integration and visibility of large inverter-based loads
On 21 July 2026, the AEMC received a rule change request from AEMO for the operational integration and visibility of large inverter-based loads (IBLs), such as data centres, in the NEM. With the increasing scale and operational significance of large IBLs, clearer and more consistent operational visibility would support efficient market operation.
The AEMC has not yet initiated this rule change request. When the AEMC initiates this process, the AEMC will publish a Consultation Paper to facilitate stakeholder consultation on the request.
A separate rule change to update technical access standards for IBLs is also being progressed with a final determination due in October.
- Cost recovery for network augmentations
On 22 July 2026, the AEMC received two related rule change requests (Package 1 and Package 2) from The Hon Chris Bowen MP to amend the NER.
The rule changes seek to strengthen the NER to ensure that data centres and other large electricity loads make an appropriate contribution to the network costs they cause or accelerate, reducing the risk that these costs are recovered from existing electricity consumers.
The AEMC has not yet initiated this rule change request. When the AEMC initiates this process, the AEMC will publish a Consultation Paper to facilitate stakeholder consultation on the request.
- AEMC advises ECMC on data centres
On 28 July 2026, the AEMC provided high-level advice to the ECMC regarding data centres, including a package of recommended reforms. The AEMC advised that data centres operating in Australia's electricity grid should bring their own clean, firmed energy, operate flexibly and connect efficiently.
The four proposed changes are:
- Bring clean energy: data centres would surrender Renewable Electricity Guarantee of Origin (REGO) certificates from new, additional generators to offset the power they use.
- Prove they're covered: data centres would need to show their demand is backed by new firm capacity, so their connection doesn’t tip the supply-demand balance and push up wholesale prices for everyone else.
- Register and play by market rules: data centres would become registered market participants.
- Be flexible: connection agreements would encourage data centres to shift demand and co-locate with generation, easing pressure on the network.
The advice comes off the back of the ECMC meeting on 8 May 2026, where the Ministers tasked the AEMC to consider how data centres should implement offsetting their electricity demand.
Other publications
AER releases annual network performance report
On 2 July 2026, the AER published its annual Network performance report, providing an independent assessment of how electricity and gas networks are performing as Australia's energy system continues to evolve.
The data in the report highlights the contrast in the trajectory of electricity networks and gas distribution networks. Investment in electricity network capacity is needed for the growth in new solar, wind generation and battery storage, while electricity distribution networks need to facilitate the co-ordination of more CER into the electricity grid. Conversely, while residential customers electrify their household gas appliances, there will be a decline in the gas delivered by gas distributors and the number of customers connected to their networks.
AEMO and CSIRO publish the GenCost 2025-26 Final Report
On 15 July 2026, the CSIRO in collaboration with AEMO released the GenCost 2025-26 Final Report. The report is an annual assessment of electricity generation, storage and hydrogen technology costs.
The report finds renewable generation, specifically solar PV and onshore wind, supported by storage, continues to represent the lowest-cost investment pathway for Australia's future electricity system under a net zero emissions scenario.
Falling battery costs and increasing storage capacity are expected to continue reshaping electricity markets over the coming years, while rising global demand for gas turbines has contributed to higher costs for new gas-fired generation technologies.
This year’s report includes a System Levelised Cost of Electricity (SLCOE) method which estimates the cost and emissions intensity of a mix of electricity generation sources; and a new open source CSIRO tool, the Simple Electricity Model (SEM), to make electricity system modelling more accessible.
The GenCost report is an important input into AEMO's Integrated System Plan (ISP), which was published in June 2026 and discussed in our May and June 2026 Update.
AEMO publishes Quarterly Energy Dynamics for Q2 2026
On 28 July 2026, AEMO published the latest Quarterly Energy Dynamics (QED) for Q2 2026 (1 April – 30 June 2026), which tracks the changes in price and demand in the NEM, WEM and East coast gas markets and their drivers.
The highlights for the East coast include:
- Wholesale electricity prices fell across the NEM: The wholesale spot prices averaged $74/MWh, down $66/MWh (-47%) from Q2 2025. Increased renewable generation, higher grid-scale battery discharge during peak periods, and reduced evening peak demand contributed to lower wholesale prices and a flatter intraday price profile. South Australia was the only region in the NEM to experience any material price volatility.
- East coast gas prices fell to their lowest level since Q2 2021 driven by lower domestic demand: East coast wholesale gas prices averaged $9.08 per gigajoule (GJ) for the quarter, lower than Q2 2025, which averaged $21.36/GJ.
- Mild weather and consumer energy resources reshaped demand patterns: NEM-wide operational demand grew in daytime hours as increased home battery charging, industrial demand and data centre load outpaced distributed PV output growth.
- Higher wind output lifted renewable generation to a new Q2 high: Wind generation reached a new Q2 high of 4,198 MW, up 20% from Q2 2025, driven by availability growth at new and commissioning facilities and improved wind conditions across all NEM regions. Queensland contributed the largest increase, with average wind generation in the region rising 80% to a new all-time high of 842 MW.
- Grid-scale battery storage increasingly shifted energy and influenced price outcomes: Growing grid-scale battery capacity more than tripled the volumes of energy shifted from daytime periods of high solar output into the evening peak.
AEMO publishes the 2026 General Power System Risk Review (GPSRR) report
On 31 July 2026, AEMO published the 2026 GPSRR report, forming part of AEMO's broader approach to identifying, assessing and managing power system security risks across the NEM. The 2026 GPSRR risk assessment process, which also involves industry participants, has identified risks that are emerging as the NEM undergoes significant changes, requiring new arrangements for management. The NEM is seeing increasing connection of new technologies such as inverter-based loads, impending retirements of ageing infrastructure, and the connection of new generation and transmission augmentations.
The four priority risks identified this year are:
- Increasing large load connections,
- non-credible system strength risks associated with unavailability of synchronous machines,
- large non-credible generation and network contingency events, and
- voltage control risks.
Wholesale Electricity Market
Proposed Amendments to the WEM Procedure: Dispatch Algorithm Formulation
On 13 July 2026, the Australian Energy Market Operator (AEMO) published a Procedure Change Proposal to propose amendments to the WEM Procedure: Dispatch Algorithm Formulation.
Amendments are proposed to reflect urgent changes made in late 2025 under clause 7.2.3 to improve the operation of the Dispatch Algorithm, regarding the treatment of Facilities to respect relevant Frequency Co-optimised Essential System Services (FCESS) trapezia and address potential violations of safe limit and defined contingency constraints.
AEMO has proposed the following amendments to the Procedure:
- Updating Constraint Violation Penalties following urgent changes implemented by AEMO in accordance with clause 7.2.3 on 30 October 2025, 5 November 2025, and 4 December 2025;
- Reducing Rate of Change of Frequency Control Service (RoCoF) Control Service Requirement fluctuation when both costs of RoCoF and Contingency Raise services are zero;
- Aligning the schedule of a Non-Scheduled Facility where a negative Unconstrained Injection Forecast has been provided;
- Improving estimates of a Facility’s potential Droop Response in the Essential System Service pre-processing calculation;
- Aligning the Procedure with current system functionality, with respect to relaxation of Enablement Limits for RoCoF Control Service in Pre-Dispatch Intervals in the Pre-Dispatch Schedule and Week-Ahead Schedule; and
- Making various improvements of an editorial nature to various paragraphs and explanatory Notes.
Proposed Changes to the WEM Procedure: Network Access Quantity Model
On 17 July 2026, AEMO published a Procedure Change Proposal to propose amendments to the WEM Procedure: Network Access Quantity Model, to resolve a potential issue with the methodology in paragraph 4.3 for the determination of the Possible Dispatch Range.
AEMO considers that without the precautionary amendment proposed, the methodology could potentially (in limited cases) affect a reduction to the Network Access Quantity (NAQ) of a Scheduled Facility or a Semi-Scheduled Facility when the Facility is not contributing to network congestion. AEMO noted that this potential issue had not manifested in previous Reserve Capacity Cycles (2022 to 2025).
Proposed Amendments to the WEM Procedure: Rule Participant Registration Processes
On 17 July 2026, AEMO published a Procedure Change Proposal to propose amendments to the WEM Procedure: Rule Participant Registration Processes, to undertake improvements to the application processes, improve clarity and streamline the application process for Market Participants.
Proposed Amendments to the WEM Procedure: Consumption Deviation Applications and Relevant Demand Excluded Days
On 20 July 2026, AEMO published a Procedure Change Proposal to propose amendments to the WEM Procedure: Consumption Deviation Applications and Relevant Demand Excluded Days, as a result of amendments that have been made to the ESM Rules through Electricity System and Market Amendment (Tranche 9) Rules 2025, Schedule 3.
The proposed amendments are required as a result of the need to account for events such as maintenance or network outages affecting Relevant Demand that could lead to unintended consequences, such as the disincentive to participate in a Demand Side Programme (DSP) and ensure DSPs are appropriately incentivised to follow Dispatch Instructions.
AEMO has proposed the following amendments to the Procedure:
- DSPs will no longer make Consumption Deviation Applications; and
- DSPs may submit a request to exclude a Trading Day for the purpose of determining the Selected Days for Relevant Demand where it deems it non-representative of its usual operation.
Draft Gas Compulsory Notice Guideline
On 20 July 2026, the Economic Regulation Authority (ERA) announced it is seeking public comment on its draft gas Compulsory Notice Guideline. The draft guideline outlines the process and obligations gas service providers and stakeholders have when issued with a notice by the ERA.
The ERA encourages interested parties to provide comments on the draft guideline as it is intended to assist stakeholders in understanding and responding to compulsory notices. Submissions close 4:00pm (AWST) on 31 August 2026, and can be lodged through an online form.
Audit of Synergy’s compliance with its regulatory scheme
On 21 July 2026, the ERA published its audit findings for Synergy's compliance with the Electricity Generation and Retail Corporation (EGRC) regulatory scheme for 2023/2024 and 2024/2025.
The EGRC regulatory scheme is intended to limit Synergy’s ability to exercise market power as the dominant generator and retailer in the Wholesale Electricity Market (WEM). The scheme requires Synergy to offer standardised electricity products in specified quantities at published prices, and prevents Synergy from favouring its retail business over its competitors when supplying wholesale electricity.
The ERA found that, on four occasions during the two-year audit period, Synergy did not comply with its obligations under the scheme but considered the identified breaches were minor and unlikely to have increased Synergy’s ability to exercise market power.
Final Report on the WEM Procedure Update: Portfolio Assessment
On 29 June 2026, the ERA published its Procedure Change Report on updates to the WEM Procedure for Portfolio Assessment which commenced on 1 July 2026.
The WEM Procedure outlines how the ERA assesses and determines Portfolios, Material Portfolios and Material Constrained Portfolios under the ESM Rules.
The key amendments made to the WEM Procedure are as follows:
- Updated example for Portfolio allocation: The example in Explanatory Note 1 has been updated to more accurately reflect how Facilities are assigned to Portfolios under the ESM Rules.
- Removal of "practical influence" concept: The reference to "practical influence" has been removed, as the ESM Rules already refer to the concepts of owning, controlling or operating a Facility.
- Updates to classification resulting from changes to Portfolios: A new clause requires the ERA to update the published list of Portfolios within 20 Business Days of receiving a declaration from a Market Participant when a new Facility is registered or there is a change in registration, ownership or control of an existing Facility.
- Requests for guidance on Offer Construction: An explicit requirement has been included for Market Participants requesting guidance in connection with the Offer Construction Guideline to provide sufficient information to enable the ERA to respond.
- Confidentiality of information: Clarification that information provided by Market Participants about ownership, registration and/or control of a Facility will be classified as Public Information or Confidential in accordance with the ESM Rules.
Associated procedural changes have been made to support the amendments, including updates to the Declaration of Control Form for Market Participants to indicate if information should be kept confidential, and associated publication processes of the ERA in respect of Portfolio Assessment.
Improving how distributed energy resources integrate into WA's southwest grid
On 20 July 2026, the Department of Energy and Economic Diversification published an issues paper to make it easier to connect solar, batteries and EV chargers and to invite feedback on seven proposals to improve how distributed energy resources (DER) integrate into Western Australia’s South West Interconnected System (SWIS).
The seven proposals focus on connection and data quality for DER and are grouped under three principles, as follows:
- Principle 1 | Increasing DER standing data quality:
- Requiring all inverters up to 30 kVA to be CSIP-AUS enabled (currently in place for Synergy customers, to be extended to all electricity retailers); establishing Western Power functions to collect, validate and share DER data to support electricity demand forecasts; and indirect data collection for electric vehicle chargers to balance better charger data with the need to keep connections simple.
- Principle 2 | Making it easier for businesses to connect DER:
- Simplifying data requirements to make it easier to connect larger DER systems (such as businesses installing solar PV systems on warehouse roofs), which is expected to result in a single connections process for all systems up to 1 MVA with faster commissioning using CSIP-AUS for systems up to 200 kVA; and new requirements for Western Power to share more information about its distribution network capacity to support targeting of projects (such as public EV charging sites) to parts of the network that can easily absorb extra electricity demand.
- Principle 3 | Better understanding how VPPs mitigate grid impacts and maximise opportunities:
- Examining mechanisms for virtual power plant (VPP) operators to provide simple capacity data to AEMO and tying Western Power requirements to sharing network capacity information with VPP opportunities for customers.
Draft gas rate of return instrument and explanatory memorandum
On 28 July 2026, the ERA published a Draft Gas Rate of Return Instrument and accompanying Explanatory Statement for its 2026 review of the gas rate of return instrument.
The gas instrument sets out the ERA’s position on determining the allowed rate of return on capital for regulated gas pipelines in Western Australia (the Dampier to Bunbury Natural Gas Pipeline, the Goldfields Gas Pipeline, and the Mid-West and South-West Gas Distribution Systems). The ERA is required to review the gas instrument and make a new gas rate of return instrument every four years.
The ERA considers most elements of the 2022 gas instrument remain appropriate. The Draft Gas Rate of Return Instrument updates parameters and includes amendments to improve transparency and implementation, including moving from a hybrid trailing average debt approach to a full trailing average debt approach.
The ERA encourages interested parties to make submissions on the 2026 draft gas instrument and explanatory statement and the upcoming report of the Independent Panel. Submissions can be lodged through the ERA's current consultation webpage and close 4:00pm (AWST) on 14 October 2026.
Synergy breached its electricity retail licence ERL1
On 30 July 2026, the ERA published a notice (Notice - Synergy - Type 1 licence breaches) that Synergy breached its electricity retail licence by failing to correctly manage the contact details for four life support equipment (LSE) customers as required by the Code of Conduct for the Supply of Electricity to Small Use Customers 2024 (Code).
The ERA considers Synergy’s preventative actions, investigation and post-implementation system review to be an appropriate response to the breach. The ERA is currently auditing Synergy’s compliance with its licence (including obligations under the Code) and will seek updates from Synergy on the outcomes of the investigation and review of its new customer management system as part of that audit.
Deadline extended for final decision for Western Power’s sixth access arrangement
The ERA has extended the deadline (Notice - Framework and approach for Western Power’s sixth access arrangement review - Extending time for final decision) for publishing its final decision on the framework and approach for Western Power’s sixth access arrangement from 31 July 2026 to 21 August 2026.
Application by Eastern Goldfields Power Project for electricity licences
The ERA is seeking public comment on the application submitted by Zenith Energy (EGP JV) Pty Ltd for an electricity generation licence and an electricity transmission licence. Zenith Energy has been contracted to deliver a renewable energy project and, in a joint venture with Northern Star Resources, a dual-fuel thermal power station.
The application is for:
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A 120 Megawatt thermal power station, comprising dual fuel (gas or diesel) generator units, and associated balance of plant, including civil works, switchrooms, control systems and transformer (generation licence).
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Transmission infrastructure and network, consisting of 5 high voltage substations and all associated 132 kilovolt underground cable system required to interconnect generation and load centres (transmission licence).
Both the generating works and transmission system will be located south-east of Kalgoorlie, adjacent to the site of the Kalgoorlie Consolidated Gold Mines Super Pit mine.
Submissions on the licence application close 4:00pm (AWST) on 21 August 2026 and can be lodged through the ERA's current consultation webpage.
Electricity System and Market Rules and Gas Services Information Rules Compliance Report
On 31 July 2026, the ERA published its six-monthly Electricity System and Market Rules and Gas Services Information Rules Compliance Report (Electricity System and Market Rules and Gas Services Information Rules - Compliance report for the period 1 January 2026 to 30 June 2026) for the period 1 January 2026 to 30 June 2026.
This report provides a summary of the ERA's compliance and enforcement activities during the reporting period, which included:
- The completion of two ESM investigations;
- Six GSI investigations completed and 12 determinations made (relating to EMF requirements, market information requirements and registration requirements); and
- One warning issued to a Market Participant under clause 2.13.36(a) of the ESM Rules for a breach of clause 7.7.11 on three occasions.
During the reporting period, 111 alleged breach reports under the ESM Rules and 61 alleged breach reports under the GSI Rules were received by the ERA from market and rule participants.
Capability Class 2 Technologies Review
On 4 August 2026, the Department of Energy and Economic Diversification published a Consultation Paper that presents the analysis undertaken in the Capability Class 2 Technologies Review and proposals to improve the operation of Capability Class 2 Technologies in the Reserve Capacity Mechanism (RCM) and the WEM.
The Consultation Paper outlines the rationale for:
- retaining the Linearly Derating Method for Electric Storage Resources (ESRs) within the RCM;
- retaining the current approach for determining Electric Storage Resource Obligation Intervals (ESROIs); and
- not introducing subclasses for tie-breaking purposes within Capability Class 2 for Network Access Quantity Prioritisation.
The Consultation Paper presents seven main proposals to amend the ESM Rules to:
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Measure the total energy delivered for assessing ESR performance in a Reserve Capacity Test.
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Change the DSP availability obligation from 8:00am to 12:00pm and 2:00pm to 10:00pm on Business days. An alternative morning window of 4:00am to 8:00am is also suggested instead of the 8:00am to 12:00pm option.
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Allow a DSP Participant to choose only the 2:00pm to 10:00pm window and receive the Reserve Capacity Price derated by 8/12.
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Allow a DSP Participant, with respect to a single Associated Load, to have its Capacity Credits reduced and a corresponding portion of its Reserve Capacity Security returned, provided certain conditions are met.
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Empower AEMO to include a Lack of Reserve – State of Charge (LOR-SOC) condition in the Low Reserve Condition Framework. This will allow AEMO to set a minimum state of charge level for the ESR fleet when AEMO determines that ESR discharge will be required during the ESROIs to prevent the risk of unserved energy.
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Ensure ESR operators can comply with the LOR-SOC obligation and their other obligations through either constraint equations or market submission changes.
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Introduce an addition to the current refund mechanism for ESRs when an LOR-SOC is in effect.
Submissions on the Consultation Paper can be emailed to energymarkets@deed.wa.gov.au and close 5:00pm (AWST) on 1 September 2026. Stakeholder feedback is specifically requested on a preferred option for proposals 2 and 6.
Authors: Dan Brown, Partner; Dale Gill, Partner; Kate Phillips, Partner; Aylin Cunsolo, Partner; Paul Newman, Consultant; Lauren Zambotti, Counsel; Isabelle Jardine, Graduate and Jenna Matus, Paralegal.
