Methodology for the Allocation, Distribution and Recovery of Settlements Residue

Overview

AEMO has concluded consultation on amendments to the Methodology for the Allocation, Distribution and Recovery of Settlements Residue to

• Reflect the National Electricity Amendment (Inter-regional settlements residue arrangements for transmission loops) Rule 2025 No. 9 – (IRSR Rule) and,
• Consolidate the Methodology for the Allocation and Distribution of Settlements Residue and the NEM Transmission Network Service Provider Negative Settlements Residue Procedure into a single document.

The consolidation of the two documents better aligns with clause 3.6.5 of the NER and provides a single source describing how AEMO allocates, distributes and recovers settlements residue, including the recovery of negative settlements residue amounts from Transmission Network Service Providers (TNSPs).

In May 2026, AEMO published a reference paper for settlements residue auctions and the distribution of inter-regional settlement residue. Content from this paper has been incorporated into this new, merged procedure.

Background

The IRSR Rule:

• Reflects Project Energy Connect (PEC) in NEMDE through the creation of a new regulated interconnector between NSW and SA. This creates a transmission loop across regional boundaries between NSW, SA and VIC that requires the inclusion of a loop constraint that represents power flow across interconnectors.
• Introduces subsequent changes to inter-regional settlements residue arrangements that are dependent on inclusion of the loop constraint. Key features are the allocation of residues to directional interconnectors in the loop based on the net trade between regions.

The transmission loop introduced through PEC is subject to the new IRSR allocation arrangements introduced under the transmission loop rule change. The existing methodology will continue to apply to interconnectors that are not part of the loop. TNSPs are impacted by these changes because, under the IRSR Rule, if there is a net negative amount, the negative residue is allocated to the TNSPs in the loop in proportion to each region's share of consumed energy, measured over the previous 52 weeks.

In line with AEMO’s completed consultation on amendments to the NEM TNSP Negative Settlements Residue Procedure for the Shortening the Settlement Cycle (SSC) rule change, AEMO will allow TNSPs an additional business day to make negative settlements residue payments during the loop transition period (NER 11.188). This applies to amounts relating to billing periods that fall wholly or partly between 1 October 2026 and 31 October 2026 (inclusive).

Consultation outcome

AEMO completed consultation on the proposed methodology changes and did not receive any submissions from stakeholders.

The Methodology for the Allocation, Distribution and Recovery of Settlements Residue effective date is 16 October 2026.