The Coordinator of Energy is conducting a review of the Australian Energy Market Operator’s (AEMO’s) Allowable Revenue Frameworks (ARFs) under the Electricity System and Market Rules (ESM) and the Gas Services Information (GSI) Rules.
This review has been initiated following two rule change proposals (RC_2024_01 and GRC_2024_01) by the Australian Energy Market Operator (AEMO), which sought to address challenges with the ARFs and replace the current Allowable Revenue and Forecast Capital Expenditure processes. In the Final Rule Change Reports, the Coordinator signalled the intent to undertake a review of the ARFs to:
- identify any issues and inefficiencies regarding the current AEMO Allowable Revenue and Forecast Capital Expenditure processes;
- undertake a jurisdictional scan of similar revenue setting mechanisms and performance reviews; and
- develop a new fit-for-purpose replacement framework for the determination of AEMO’s Allowable Revenue and Forecast Capital Expenditure under the ESM and GSI Rules.
The Review is being undertaken in three stages:
Stage 1: Assess existing frameworks.
Stage 2: Options development and assessment, proposals development.
Stage 3: Proposed policy position and implementation.
Energy Policy WA held a workshop on 13 May 2025 with interested industry stakeholders to consult on policy proposals and gather feedback on these ahead of the release of a Consultation Paper.
ARF Review Consultation Paper
On 17 July 2025, Energy Policy WA published a Consultation Paper that presents the findings of Stages 1 and 2 of the ARF Review. Developed in collaboration with AEMO and the ERA, the paper sets out proposals for a new fit-for-purpose replacement framework for the determination of AEMO’s Allowable Revenue and Forecast Capital Expenditure under the ESM and GSI Rules.
The paper includes proposals for
- A revised funding framework separating business-as-usual (BAU) and non-BAU expenditure:
- BAU expenditure will continue to be approved by the ERA, with baseline funding adjusted annually by indexation less an efficiency target. Further ERA review is only required if the adjusted baseline exceeds a 10% or $5 million ($0.25 million for GSI Rules) threshold
- Non-BAU project plans and budgets will be reviewed by a new Independent Panel but ultimately approved by AEMO. The Panel (established by the Coordinator) must publish the outcomes of its review, to which AEMO must publicly respond to this before approving its plans and budgets.
- Enhanced governance and reporting to strengthen reputational incentives supported by the Independent Panel:
- AEMO will publish audited WA financial accounts
- AEMO will publish executive KPIs linked to cost efficiency and timely project delivery
- The Independent Panel will assess and report on AEMO’s delivery performance annually and review quarterly project reports against approved plans and budgets.
The window for submitting feedback on the Consultation Paper closed at 5:00pm on 14 August 2025. Stakeholder submissions received are available below.
Print this page
