The Australian Energy Market Operator (AEMO) is celebrating a milestone in the National Electricity Market (NEM) Reform Program, announcing the successful implementation of the Frequency Performance Payments (FPP) incentive.
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 – forming a zero-sum system.
After more than five years of collaborative development with industry, the reform officially went live on 8 June 2025.
FPP replaces the Causer Pays model with a more accurate, five-minute contribution factor framework, enabling fairer and more transparent cost allocation for regulation Frequency Control Ancillary Services (FCAS). AEMO said this modernised approach provides clearer price signals to participants, improving operational decision-making across the market.
AEMO Executive General Manager of Operations, Michael Gatt, said the reform represents a transformational shift in how the power system is managed as the energy market continues to transition toward a lower emissions future.
“The implementation of FPP marks a step-change in how we incentivise helpful frequency performance in the NEM.
“It brings real-time accountability, promotes market balance, and strengthens the case for fast, flexible technologies that are essential to maintaining grid stability as traditional generation retires,” Mr Gatt said.
He also highlighted the broader benefits of the reform for both the market and AEMO operations.
“Participants now have access to better data and clearer incentives that support more efficient operations.
“By recognising and valuing the role of emerging technologies such as batteries and responsive loads, FPP enhances investment signals and supports innovation across the sector.
“It ensures that those who contribute positively to system frequency are fairly compensated, while costs are recovered from those with an unhelpful contribution – aligning market behaviours with system needs.
“This reform is about equipping the NEM for the future,” Mr Gatt said.
AEMO extended its appreciation to the many stakeholders across industry, market bodies and government whose insights and engagement helped shape the design and successful delivery of this reform.
To learn more about the FPP reform or get involved with the program’s initiatives, please visit AEMO’s FPP project page or NEM Reform Program.
