Credit support and reserve capacity security
Under the WEM Rules, Rule Participants are required to provide AEMO with Credit Support or Reserve Capacity Security in certain circumstances. Credit Support is required to adequately cover a Rule Participants’s operational exposure in the market, while Reserve Capacity Security is required for Facilities that have been assigned Capacity Credits which are in new in development or undergoing significant maintenance or upgrade.
In accordance with the WEM Rules, AEMO accepts Credit Support and Reserve Capacity Security in the form of a Security Deposit (accompanied by a deed) or a Bank Guarantee from an entity that meets the Acceptable Credit Criteria. Rule Participants must provide Credit Support or Reserve Capacity Security in the format prescribed by AEMO in the relevant sections below.
The following sections provide instructions to assist Rule Participants in providing Credit Support and Reserve Capacity Security. These instructions should be read in conjunction with the WEM Rules, the Market Procedures for Reserve Capacity Security and the Market Procedure for Prudential Requirements. Market Procedures are available on the Market Web Site here.
Reserve Capacity Security guideline
AEMO has developed a guideline to assist Market Participants to submit Reserve Capacity Security, which can be viewed at AEMO | Reserve Capacity security.
WEM Credit Support guideline
Under the WEM Rules, AEMO must determine a Credit Limit for each Rule Participant [WEM Rule 2.37.1]. Rule Participants must ensure that, at all times, AEMO holds the benefit of Credit Support that is an amount not less than the most recently determined Credit Limit [WEM Rule 2.38.1(b)].
The information below provides guidance to Rule Participants who wish to update their Credit Support arrangements in the WEM and should be read in conjunction with the WEM Rules and the Market Procedure: Prudential Requirements.
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Providing or increasing Credit Support
In accordance with the WEM Rules, AEMO accepts Credit Support in the form of:
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A Bank Guarantee from an entity that meets the Acceptable Credit Criteria; or
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A cash deposit (Security Deposit).
Providing a Bank Guarantee
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Rule Participants must provide Credit Support in the format prescribed by AEMO. A Bank Guarantee template is available on AEMO’s website and must not to be altered.
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A Bank Guarantee must be provided by an entity that meets the Acceptable Credit Criteria. AEMO publishes a list of Entities that meet the Acceptable Credit Criteria. If a Rule Participant wishes to provide a bank guarantee from an entity that is not on the list then an ‘Acceptable Credit Criteria Application Form’ must be provided.
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A draft Bank Guarantee must be submitted to AEMO at wa.settlements@aemo.com.au in draft for review prior to being executed.
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Once the draft document has been agreed by AEMO, a signed original hard copy of the Bank Guarantee must be provided to AEMO either in person, by courier or registered mail.
Providing a Security Deposit
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A Security Deposit must be provided via Austraclear (NEMM32) or deposited into the following AEMO account. Rule Participants must advise AEMO when a deposit has been made:
Branch:
Account Name:
BSB:
Account:
National Australia Bank, 100 St Georges Terrace WA 6000
Australian Energy Market Operator Ltd on account of Western Australia Settlements
086-006
23-718-2404
When providing a Security Deposit for the first time, a Rule Participant must provide a corresponding Security Deposit deed.
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A Security Deposit deed template is available on AEMO’s website and must not to be altered.
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A draft Security Deposit deed must be submitted to AEMO at wa.settlements@aemo.com.au for review prior to being executed.
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Once the draft document has been agreed by AEMO, a signed original hard copy of the Security Deposit deed must be provided to AEMO as soon as practicable. The Security Deposit deed must be signed by directors from the Rule Participant.
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Once the document ha been received AEMO will arrange its directors to execute the Security Deposit deed and return a scanned copy to the Rule Participant.
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When increasing the amount of a Security Deposit, Rule Participants may provide AEMO with a Security Deposit direction rather than a replacement deed. The benefit of a Security Deposit direction is that may be sent to AEMO via email at wa.settlements@aemo.com.au by an authorised representative, rather than requiring a director’s signature.
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In relation to each Security Deposit provided by Rule Participants:
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A Security Deposit gives rise to a security interest under the Personal Property Securities Act (PPSA) and is therefore registered on the Personal Property Securities Register (PPSR) in order to safeguard the security as contemplated in each Security Deposit deed. Rule Participants are provided with a copy of the PPSR registration documents.
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Once cleared funds are available, AEMO will deposit the funds into an interest-bearing trust account. Interest will be payable to the Rule Participant as per the Security Deposit – Investment Policy.
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Decreasing or request return of Credit Support
If a Rule Participant’s Credit Limit is lower than the Credit Support held by AEMO, the Market Participant may elect to withdraw an amount to decrease its Credit Support to an amount not less than its most recently determined Credit Limit.
- A Rule Participant must make a request to AEMO - WA Prudentials & Settlements (wa.settlements@aemo.com.au) in writing for withdrawal of its Credit Support.
- The return of a Bank Guarantee must be arranged with AEMO and will require the completion of a form to acknowledge the return of the Bank Guarantee.
- A Security Deposit will be returned to the Austraclear ID nominated by the Rule Participant in the Wholesale Electricity Market System (WEMS). If the Rule Participant wishes to receive the funds via EFT then AEMO will return funds to the bank account details provided in the WEMS.
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Amending the form of existing Credit Support
A Rule Participant may choose to update or amend its form of existing Credit Support (e.g. swap a Security Deposit for a Bank Guarantee, swap a Bank Guarantee for a Security Deposit, replace a Bank Guarantee).
- A Market Participant must make a request to AEMO - WA Prudentials & Settlements (wa.settlements@aemo.com.au) in writing.
- Note that Credit Support held by AEMO can only be released once the updated Credit Support documents are executed.
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Bank Guarantees
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Security Deposits
The following templates must be used when providing a Bank Guarantee for Credit Support or Reserve Capacity Security in accordance with WEM Rules 2.38.4(a) and 4.13.5(a):
Templates
Bank Guarantee for Reserve Capacity Security or Credit Support
Bank Guarantees for Reserve Capacity Security or Credit Support must be provided from an entity that meet the Acceptable Credit Criteria detailed in WEM Rule 2.38.6.
AEMO maintains on the Market Web Site a list of entities that meet the Acceptable Credit Criteria. If a Rule Participant elects to provide Credit Support or Reserve Capacity Security from an entity that is not currently included in the list of entities that meet the Acceptable Credit Criteria, the Rule Participant must provide AEMO with a completed Acceptable Credit Criteria Application form.
Rule Participants must provide AEMO with contact details for an internal contact and the relevant contact at the entity providing the Bank Guarantee using the Contact details for Bank Guarantee provider form. Any updates to the details above must be submitted using the Change of contact details for Bank Guarantees provider form.
| Acceptable Credit Criteria |
List of Entities that meet the Acceptable Credit Criteria (111 KB, pdf) |
| Bank Contact Details |
Form – Contact details for Bank Guarantee provider Form - Change of contact details for Bank Guarantees provider |
The following Security Deposit Deed templates must be used when providing a Security Deposit for Credit Support or Reserve Capacity Security in accordance with WEM Rules 2.38.4(b) and 4.13.5(b):
Templates
A Security Deposit deed must be provided for each Security Deposit lodged with AEMO.
When amending the amount of a Security Deposit for Credit Support, Rule Participants may provide AEMO with a Security Deposit direction for Credit Support rather than a replacement deed provided the original Security Deposit deed for Credit Support is in the above format (v 5.0 or later).
The instructions for lodging a Security Deposit with AEMO are as follows. Security Deposits must be deposited into the following account:
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Bank: Branch: Account Name: BSB: Account: |
National Australia Bank National Australia Bank, 100 St Georges Terrace WA 6000 Australian Energy Market Operator Ltd on account of Western Australia Settlements 086-006 23-718-2404 |
Please note that AEMO must be notified once funds have been deposited and all funds must be cleared by the appropriate date. Once cleared funds are available, AEMO will deposit the funds into an interest-bearing trust account. Interest will be payable to the Participant as per the Security Deposit – Investment Policy.
Security Deposits – Investment Policy
Under WEM Rules 2.38.5 and 4.13.6, AEMO must pay the Rule Participant the interest accumulated on the deposit less any liabilities and expenses incurred by AEMO, including bank fees and charges. AEMO also registers its security interests on the Personal Property Securities Register. The investment policy document, basis for determining the bank bill rate and Personal Property Securities details can be found here.
Prepayments Direction
A Rule Participant may make a voluntary prepayment to AEMO, at any time, to reduce its Outstanding Amount and thereby increase its Trading Margin as per WEM Rule 2.40.1(c) and the Market Procedure: Prudential Requirements. For each voluntary prepayment, a Rule Participant must provide a completed Prepayment Direction and cleared funds:
- Prepayment Directions, including Standing Prepayment Agreements, must be provided to AEMO through WEMS MPI. Please refer to Section 4.5 of the WEMS MPI User Guide: Prudential and Settlement Services for details on how to submit prepayment directions through the Prudential-Settlements portal.l.
- Cleared funds must be provided to AEMO via Austraclear or into the Security Deposit bank account noted above.