4 Shortening Settlements Cycle

4.1 Goal

The Shortening Settlements See Relevant Rules or Procedures Cycle (SSC) project aims to reduce the settlement cycle to 9 business days following the end of the billing cycle and new revision 20 business days following the end of the billing period Energy Rules Terms.

This change reduced the prudential collateral AEMO Australian Energy Market Operator holds to covered accrued liabilities (unpaid settlement amounts) in the NEM. Lowering the capital requirements lowers the barriers to market entry for smaller retailers and provides increased investment in service innovation and more competition.

For more information, see Shortening the Settlement Cycle HLIA.

4.2 SSC changes

The SSC rule has three major components:

  • Metering and settlement processes supporting the new, shorter settlement cycle.
  • Credit limit procedures and supporting process to reflect the shorter settlement cycle.
  • Transition metering, settlement and prudential processes from the current settlement cycle to the shorter settlement cycle.

4.2.1 Shorter settlement cycle

In the image:

  • The current settlement calendar shows the preliminary and final statements posted on business days 5 and 18 respectively following billing week X. Final settlement occurs on business day 20.

A screenshot of a calendar AI-generated content may be incorrect.

  • The shorter settlement calendar includes an earlier preliminary statement posting on business day 3 and the final posting forward to business day 7 with settlement at business day 9. The R0 revision is posted on business day 20 with the R0 adjustment amount included in a final statement posted not less 10 than 8 business days after R0 posting, meaning, the final statement posted on business day 32 and settled on business day 34.

These changes involve an update to the metering, settlements and clearing calendars and a plan to transition from the current to the shorter settlement cycle.

4.2.2 Credit limit changes

This change reduces the timeline between a billing week and its financial settlement resulting in a reduced outstandings period. The outstandings period and the reaction period define the timeframe during which a participant’s liabilities may accrue and form the basis for establishing credit support requirements. A reduced outstandings limit indicates a lower the credit support and working capital requirements for participants.

A screenshot of a computer AI-generated content may be incorrect.

The image above illustrates:

  • The relationship of the current settlement cycle to the 35 day outstandings period and the reaction period. The outstandings period represents the accrual of liabilities during normal operation. The reaction period is the time to remove a defaulting participant from the market.
  • The shorter settlement calendar, highlighting the shortened outstandings period. The reaction period, which is a function of the default and suspension process, remains unchanged.

These changes involve an update to the Credit Limit Procedures (CLP) and a plan to transition to new credit support requirements.

4.2.3 Transition to shorter settlements cycle

AEMO transitions from the current to the shorter settlement cycle between August and October 2026. The transition plan ensures:

  • Final statements and settlement are maintained in billing week order
  • Transitional and new calendars are well understood
  • Timing for new credit support requirements is clear

The following image is an example transition calendar from the current settlement cycle to a shortened settlement cycle. It includes the posting of preliminary, final and revision statements, the settlement of final statements and the metering data calendar that aligns with the preliminary and final settlement statement runs.A screenshot of a calendar AI-generated content may be incorrect.

The transition period involves updating metering and settlement calendars and close collaboration with metering data providers (MDPs) and market participants to ensure a high-level of preparedness. AEMO facilitates prudential collateral return as soon as practical as the time period between billing week and settlement is reduced.

4.3 High-level changes

Function

Description

Reference

Settlements

  • Configuration updates to include the new settlement calendar.

  • Changes to the settlement auto scheduler for INITIAL allocations received.

  • Configuration updates to include the R0.

5 Settlements, Billing, and Invoicing

Billing

  • Configuration changes to include the changes in the Billing calendar.

  • Development and integration of new Security Deposit Management functionality.

  • Interest calculation changes

5 Settlements, Billing, and Invoicing

Prudentials

  • Changes to the calculation of accruals (days outstanding).

  • Calculation to MCL.

  • Reallocations

    • Change to the reallocations timetable.

    • Change to reallocations to be completed no later than final.

    • Impacts to reallocations ex ante and ex post dates.

  • Prudential changes to include R0 adjustments in outstandings rather than waiting for next final bill which includes R0 adjustment

6 Prudentials

Reporting and invoicing

  • New reports for R0 revision.

  • Changes to include the Prelim case and additional information used in the Final.

5 Settlements, Billing, and Invoicing

EMMS Data Model v5.7

  • Data model changes to incorporate new Settlement Revision R0 and associated posting timings in the billing calendar.

  • Potential changes to the Billing Data model to incorporate Security Deposit Model changes.

7 Electricity Data Model 5.7

Markets Portal

  • A new screen and workflow for Security Deposit Management

  • Used for FRMPs to identify the provision, application and rollover of security deposit amounts (and replaces current excel and email-based processes)

  • Acts as input into the billing systems

8 Markets Portal

APIs

Detailed specifications and context for new and updated Prudential APIs

9 APIs