Investment policy and Bank Bill rate

Investment policy and Bank Bill rate

This investment policy indicates the basis for setting the Bank Bill Rate and also outlines AEMO's policy with respect to investment of Security Deposit funds.

Rule Participants are required to provide various forms of security. Credit Support is required to provide prudential support for the operational exposure of Rule Participants to the market, while Reserve Capacity Security is required for projects that have been assigned Capacity Credits and which are under construction, or in development.

Rule Participants may provide Credit Support or Reserve Capacity Security in the form of Security Deposits. Under clauses 2.38.5 and 4.13.6 of the WEM Rules AEMO must pay the Rule Participants the interest accumulated on the deposit less any liabilities and expenses incurred by AEMO, including bank fees and charges.

The Bank Bill rate is a defined term in the Wholesale Electricity Market (WEM) Rules. It is the rate set by AEMO based on an industry standard market indicator, details of which must be published by AEMO. The Bank Bill rate is set:

• At approximately 10.00 am on any given Business Day to apply for that day.
• If the relevant day is not a Business Day, or AEMO does not set a rate for that day, on the previous Business Day on which a rate was set under paragraph (a).

The following WEM Rules reference the Bank Bill rate:

• 2.38.5. Where Credit Support is provided as a Security Deposit in accordance with clause 2.38.4(b), it will accrue interest daily at the Bank Bill Rate, and AEMO must pay the Rule Participant or network operator the interest accumulated at the end of each calendar month less any liabilities and expenses incurred by AEMO, including bank fees and charges.
• 9.1.4. Where these WEM rules indicate interest is payable on an amount, interest accrues daily at the Bank Bill Rate from (and including) the date that payment was due up to (but excluding) the date of payment, or in the case of an adjusted Settlement Statement provided under clause 9.15 from (and including) the payment due date for the Invoice issued for the original Settlement Statement up to (but excluding) the actual date of payment for the Invoice issued for the adjusted Settlement Statement.

Basis for determining Bank Bill rate

The Bank Bill Rate is calculated  based on the cash rate target published by Reserve Bank of Australia plus applicable margin. The relevant term is one calendar month, where the rate is set on the last business day of the preceding month, and will apply from the following day up to and including the last business day of the following month.

Historic Bank Bill rates