Edition 12 · 23 September 2026 · 5 min read
Energy Ministers put a reform package out for consultation on 14 September, and nearly every write-up I read picked the same piece of it. ESEM got the headlines, fair enough, since it's what keeps investment moving once the Capacity Investment Scheme finishes. The part I keep going back to sits a line below it, and it's the one that touches what your next contract costs.
The Take: the liquidity reform hiding behind ESEM
The package is broader than the coverage suggests. It contains draft laws and rules for three things: ESEM, a market making obligation, and a framework to improve visibility of price-responsive resources and how they participate in the market. Submissions close at 11:59pm AEDT on 13 October, and Energy Ministers make further decisions in December. Every NEM jurisdiction except Queensland is in.
ESEM is a supply-side mechanism. It shapes who builds what, and it's a 2027-and-beyond story. A market making obligation does something far less glamorous and much closer to your desk. In plain terms it's a requirement on participants to keep buy and sell prices on the screen, so there's a tradeable number where today there might not be one. Ministers agreed back in May to develop the legislative package for ESEM and the market making obligation together, so this isn't a late addition someone stapled on.
Here's why that matters commercially. When the contract market is thin at the tenor and region your client wants to buy, the retailer writing the offer can't hedge it cleanly. It prices that difficulty in. You don't see it as a line item, because there isn't one. It arrives folded into margin, and it's the least visible component of a fixed-price offer.
I'm not going to tell you liquidity is the variable that sets your price. The forward curve and your own load shape do more of the work. But it's the component you currently can't see and therefore can't argue with, and it's the one a statutory obligation would actually move.
So, two things. First, if you or your clients buy hedged or progressive-purchase product, read the draft rule and lodge before 13 October, and be specific about which contract types, tenors and regions have to be quoted. An obligation is worth exactly what its coverage list says it's worth. If the quarterly caps and three-year swaps in your client's region aren't in scope, the reform delivers you nothing.
Second, in your next tender, ask every retailer to state in writing what risk premium they've loaded for that region and that tenor. Plenty will decline. Ask anyway, and record who did. From December you'll have a policy direction to point at when you reopen the number at renewal. Clients signing three-year deals this quarter are pricing in today's illiquidity across a period where the structure underneath it is under active reform.
Quick Hits
Ofgem wants battery projects to pay for their place in the queue. On 17 September it opened a consultation on a commitment fee for oversubscribed technologies, on the basis that around 90 GW of battery capacity is operational or in the reformed connections queue against a need for roughly 29 GW by 2035. The fee starts at £3,000 per MW and rises to £25,000 per MW, switching on once a technology runs more than 50% above target. So what: this attaches a carrying cost to a queue position rather than another eligibility test, and it's the sort of mechanism that gets copied. If you model supply-side build anywhere with a congested queue, the filter on that pipeline is about to become financial.
The AEMC made its payment difficulty rule on 10 September. Under the final rule, retailers will have to reach at-risk customers on at least two communication channels before disconnection, with simpler eligibility categories and clearer information on reminder and disconnection notices. A separate draft rule would stop retailers demanding proof of a customer's financial circumstances before helping them. The AER's data has residential customers carrying 90-day-plus energy debt at a five-year high. So what: multi-channel contact logs and evidence-free hardship onboarding are billing and CRM work, not policy work. If you advise or audit a retailer, scope it now rather than in the quarter it commences.
Submissions on the Safeguard Mechanism review closed on 18 September. In scope: the baseline decline rate for 2030-31 to 2034-35, coverage arrangements, the future role of Safeguard Mechanism credits, ACCUs and international units, and the treatment of trade-exposed facilities. The Climate Change Authority advises on the decline rate, and policy positions with any draft rule amendments land in early 2027. So what: if you're modelling a PPA or abatement capex past 2030, the carbon cost sitting in that model is a placeholder and stays one until next year. Label it as one in the board pack, because right now it reads like a number.
From the blog
If the Take has you looking harder at how an offer gets built, our guide to energy procurement for large business covers the contract structures underneath it and how to time a tender against the forward curve. Read it here.
The Sign-Off
Three public webinars run alongside this consultation, and I'd sit in on them. A consultation paper tells you what's proposed. The webinars tend to tell you what's still genuinely open, which is the only part worth spending a submission on.
The question I'm turning over: if a market making obligation does land in December, does the saving reach the customer, or does it just shift margin between a retailer and its hedge counterparty? My honest read is that it reaches the buyers who ask for it itemised and stays with the retailer for everyone else. Mandated liquidity lowers the cost of hedging a portfolio. Nothing in a rule makes anyone hand that back. The people who capture it will be the ones who already knew what they were paying for it.
If you're lodging on this package, I'd like to see what you're arguing. Just reply.
Until next fortnight,
Cohen
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