The Australian Energy Market Commission is seeking feedback on a request to amend the National Electricity Rules for network infrastructure projects that experience significant cost increases following completion of the regulatory investment test (RIT).
This rule change request, submitted by Energy Users Association of Australia, Delta Electricity, Major Energy Users, Inc., ERM Power Limited (now Shell Energy Operations Pty Ltd) and AGL Energy Limited, proposes that where a transmission or distribution project experiences a material increase in costs after the RIT is completed, the test should be reapplied unless the Australian Energy Regulator (AER) grants an exemption.
The rule change proponents are concerned the estimated costs of a project, as set out in the RIT, can rise significantly at the point of seeking funding approval from the AER.
Under existing arrangements, the RIT must only be reapplied where, in the reasonable opinion of the project proponent, there has been a material change in circumstances that changes the preferred project option identified in the final RIT report.
The rule change proponents consider that this arrangement is inadequate and is undermining confidence in the regulatory framework. To address this, they propose that objective cost increase thresholds be included in the relevant provisions so that reapplication of the RIT does not rely on the project proponent forming the opinion that circumstances have materially changed.
Consultation on this rule change request is being progressed as part of the Commission’s Transmission planning and investment review as both involve managing uncertainty in transmission project planning and investment. Submissions close on 30 September 2021. A public forum will be held on 2 September 2021, dealing with both the review and the rule change request. Registration details are available here.
For more information and contact details on the:
- rule change visit the Material change in network infrastructure project costs project page.
- review visit the Transmission planning and investment review project page.