Electricity Market Participants on Notice: AER Releases Guidance on Automated Bidding and Third-Party Services

On 5 August 2026, the Australian Energy Regulator (AER) issued the Compliance Bulletin clarifying its expectations for the use of automated bidding and third-party bidding service providers in the National Electricity Market (NEM). The Compliance Bulletin does not create new obligations, but it highlights compliance risks and sets out best-practice expectations for Market Participants¹ and third-party providers.

Why is This Important?

Automated bidding was flagged in the NEM wholesale market settings review chaired by Associate Professor Tim Nelson as a key risk and an area of future regulatory scrutiny, and the Compliance Bulletin confirms that scrutiny is increasing. While the AER acknowledges the operational benefits of automation, it expects Market Participants to maintain effective oversight, carry out robust due diligence of third-party providers and be able to demonstrate and explain automated bidding decisions if questioned.

What Are the Key Messages From the AER?

Greater Automation May Increase Compliance Risks

Market Participants remain responsible for ensuring all bids and rebids comply with the National Electricity Rules (NER), whether submitted manually, through internally developed software or via a third-party provider.

Systems that submit bids directly to the Australian Energy Market Operator without allowing the Market Participant to independently verify or adjust the bid present a higher compliance risk. Market Participants are expected to maintain appropriate oversight and control over automated bidding processes and implement suitable risk management measures.

Any noncompliance arising from automated bidding remains the responsibility of the relevant Market Participant.

Relevant obligations include the following:

• Rebid explanation requirements.
• Prohibitions on false or misleading bids and rebids.
• Obligations to ensure plant capability aligns with submitted bids. 

Competition Law Risks Must Also Be Considered

Bids submitted via third-party providers should be developed independently for each Market Participant, reflecting that participant’s technical parameters, portfolio constraints and commercial strategy. Participants and service providers should avoid arrangements that could facilitate cartel conduct, bid rigging or concerted practices under the Competition and Consumer Act 2010 (Cth).

Expectations When Using Third-Party Bidding Providers

The Compliance Bulletin sets out a due diligence framework for Market Participants engaging third-party bidding services, automated bidders or self-forecasting providers, recommending that they do the following:

• Undertake comprehensive due diligence on the provider and its systems.
• Understand how the service supports NER compliance.
• Ensure contractual arrangements support compliance obligations.
• Retain the ability to tailor software settings to site-specific circumstances.
• Confirm providers update systems in response to rule changes and AER guidance.
• Regularly monitor, audit and review the service.
• Maintain contingency plans for system failures, updates or technical issues.

Importantly, the AER reminds third-party bidding providers that they may face accessorial liability if their services contribute to a Market Participant’s breach of the National Electricity Law.

Contemporaneous Records for Automated Rebids

The Compliance Bulletin also gives guidance on record-keeping for automated rebids. Contemporaneous records should ideally include the following:

• The instructions or algorithms relied upon by the automated system.
• The triggering events or conditions that prompted the rebid.
• Relevant thresholds used by the system.
• Any standing instructions provided to third-party service providers.

Detailed system-generated logs may satisfy record-keeping requirements where they adequately record the following:

• Inputs used by the system.
• Decision logic applied.
• Outputs produced for each rebid decision. 

These suggestions are not yet mandatory, but the AER indicates they are likely to inform future amendments to the AER’s published Rebidding and Technical Parameters Guidelines.

What Are the Practical Implications for Generators and Integrated Resource Providers?

If you use optimisation platforms, bidding aggregators or third-party market services, the key takeaways are as follows:

1. Responsibility cannot be outsourced. Market Participants remain accountable for compliance, even where bidding decisions are fully or partly automated. 
2. Governance matters. Market Participants should have documented oversight procedures, approval frameworks and compliance controls around automated bidding systems. 
3. Contract reviews may be warranted. Review existing agreements with bidding service providers to ensure compliance obligations, audit rights and update obligations are appropriately allocated.
4. Record-keeping requirements are becoming more sophisticated. Assess whether your current software captures sufficient information to explain an automated rebid if requested by the AER. 
5. Competition law compliance should not be overlooked. Particularly where a service provider is acting for multiple participants in the market.