Administered pricing

This is a regulatory mechanism to protect participants and consumers from sustained periods of high wholesale prices, and can significantly reduce prices during volatile periods.

When is it applied?

In the NEM, if the sum of the trading prices over the previous 7 days exceeds the cumulative price threshold, AEMO caps the price between -$600 to $600/MWh until the next 4am settlement period where the cumulative price no longer exceeds the threshold.

The chart below shows a plot of one of the periods in our model where administered price capping is applied. The bottom chart shows the 7 day rolling sum, which increases across the day of March 19th to above the threshold marked by the horizontal dashed reference line, at which time the price (shown on the top subplot) is reduced from $12k to the administered price cap of $600/MWh towards the end of the day on March 19th 2030.

The administered price period then ends at 4am on March 24th.

We have assumed that the administered price cap will remain $600/MWh for the forecast horizon, as this has only historically changed one time upon request.

We have assumed the below cumulative price thresholds for backtest/near future years, which have been published by AEMO. For financial years past FY26, we have assumed a CPT of 90x the market cap, which has been the established relationship thus far.