About the Allowable Revenue process
AEMO is a non-profit organisation with Western Australian functions that include operating the Wholesale Electricity Market (WEM) in accordance with the WEM Rules, and the provision of services to the gas market in accordance with the Gas Services Information (GSI) Rules.
AEMO recovers the costs of performing its functions via fees paid by market participants, based on expenditure approved by the Economic Regulation Authority (ERA) under the allowable revenue determination process outlined in the WEM Rules and GSI Rules. This process is designed to provide assurance to participants that the estimated costs of operating the electricity market and the power system, and providing GSI services, are efficient and have been determined on a reasonable basis. It provides transparency to market participants that electricity market and power system operations are prudent, achieving an acceptable balance between cost, risk, and service.
Every three years, AEMO must submit its allowable revenue and forecast capital expenditure proposal to the ERA for review and approval. The current allowable revenue period, known as AR6, ends on 30 June 2025.
AEMO’s allowable revenue proposals must comply with the requirements of section 2.24 of the WEM Rules, Part 7 of the GSI Rules, and the ERA’s Guideline to inform the Australian Energy Market Operator’s funding proposal. In addition to the public proposal, AEMO provides a range of supporting financial information to the ERA to assist in its verification processes.
Following consideration of AEMO’s funding proposal, the ERA will publish a draft determination, with industry invited to comment. In its final determination, the ERA may fully or partially approve costs, reject costs, or fully or partially substitute costs with those it considers meets the requirements outlined in the WEM Rules and GSI Rules. The ERA may also recommend that AEMO considers some of its costs in subsequent review periods.
While the allowable revenue period spans three years, under the WEM Rules, AEMO must make an in-period submission to the ERA for the reassessment of AEMO’s funding where AEMO forecasts a shortfall of at least 10% or $10 million over the period. A similar requirement exists under the GSI Rules, with a lower threshold of 10% or $0.5 million.
Current and historical allowable revenue documents are available on the ERA’s web page: Allowable Revenue and Forecast Capital Expenditure Determinations.
To find out more about AEMO’s approach to engaging with stakeholders during this process, please visit the web page: Engaging on the Allowable Revenue Process.