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The AEMC is considering a Rule change request that was submitted by the Major Energy Users which seeks to constrain the potential exercise of market power by generators in the National Electricity Market.

The AEMC has a released a directions paper which sets out the  proposed definition of 'substantial market power' in the context of the National Electricity Market, which is:

"The ability of a generator to increase annual average wholesale prices to a level that exceeds long run marginal cost (LRMC), and sustain prices at that level due to the presence of significant barriers to entry."

The paper also defines the 'exercise' of substantial market power. The Commission considers that regulatory intervention is only potentially justified if there is evidence that a generator has exercised, or is likely to exercise, substantial market power.

"A generator exercises substantial market power where it engages in conduct that has the effect of increasing annual average wholesale prices to a level that exceeds LRMC, and the generator is able (or is likely to be able) to sustain prices at that level due to the presence of significant barriers to entry."