Final rule on new planning arrangements for replacement assets by electricity network businesses

18 July 2017

The AEMC today made a final rule on new obligations on network businesses to provide more information on their plans for retirement and replacement of electricity network assets.

As the technology-driven transformation of the electricity market continues, there is now a greater focus on managing the existing electricity network in new ways. For example, developments in battery storage, demand response and other technologies may provide alternatives to ‘poles and wires’ when parts of the network need to be replaced.

Taking account of these changes, the rule extends some of the mechanisms and planning arrangements in the rules to provide better information and more transparency on upcoming network replacement projects.

Under the rule, transmission and distribution network businesses would be required to include information on plans to retire electricity network assets or reduce their capability (known as ‘de-rating’) in their annual planning reports. The rule also extends the application of regulatory investment tests (the RIT-T and RIT-D) to include replacement projects. These tests, which currently only apply to augmentation projects, require network businesses to weigh up the costs and benefits of potential network and non-network solutions.

Improving transparency should help providers of non-network solutions, such as battery storage, embedded generation and demand response, to identify investment opportunities in the network.

Increased transparency is also likely to assist the Australian Energy Regulator and stakeholders in processes to determine network service provider revenues.

These new requirements make the planning process for replacement projects consistent with the process for planning network augmentation projects. They include an implementation approach for the new requirements.

The new reporting requirements will start immediately for all network businesses except Ergon and Energex. To accommodate jurisdictional requirements, the new reporting requirements for Ergon and Energex will start in January 2018.

The new requirement to undertake a regulatory investment test for replacement expenditure starts in September 2017, except for those projects that have reached a ‘committed’ stage on or prior to 30 January 2018. Replacement projects relating to the second stage of a program to install rapid earth fault current limiters under the Electricity Safety (Bushfire Mitigation) Regulations 2013 (Vic) are also exempt.

 

Media: Prudence Anderson 0404 821 935 or (02) 8296 7817