Post: Frequency Performance Payments reform takes effect

Frequency Performance Payments reform takes effect

The Australian Energy Market Operator (AEMO) has announced the successful implementation of the Frequency Performance Payments (FPP) reform.

The reform officially went live on 8 June 2025. Implemented under the Primary Frequency Response Incentives rule, FPP introduces a double-sided mechanism that incentivises market participants in real-time based on how their assets impact system frequency. Participants with “helpful” impacts on frequency will receive incentives, which are recovered from those with “unhelpful” impacts.

The reform creates a system of positive and negative FPPs, which will give market participants information on their frequency performance and its dollar value (or cost). Under the new arrangements, generation units’ performance and five-minute Contribution Factors calculated for FPP will be used to allocate the recovery of Regulation Frequency Control Ancillary Services (FCAS) costs. Ultimately, the rule is intended to incentivise plant behaviour that reduces the overall cost of frequency regulation in the National Electricity Market. 

FPP replaces the ‘Causer Pays’ model with a more accurate, five-minute contribution factor framework, enabling fairer and more transparent cost allocation for regulation RCAS. Causer Pays recovers Regulation FCAS costs from those electricity generators who have an overall negative impact on the power system, while those who do not have a negative impact avoid paying any costs. AEMO said the FPP approach provides clearer price signals to participants, improving operational decision-making across the market.