The Australian Energy Market Commission (AEMC) has published a draft determination that seeks to improve the accuracy of cost estimates by clarifying the rules around the guidelines for the Regulatory Investment Test (RIT).
In assessing the Material change in network infrastructure project costs rule change request, the Commission opted to make a more preferable draft rule that also offers more clarity around the requirements of all RIT proponents to consider whether there has been a material change in circumstances (MCC).
Under the current MCC provisions, the RIT must be reapplied where, in the reasonable opinion of the RIT proponent, there has subsequently been a material change in circumstances, meaning the preferred option identified through the RIT is no longer the preferred option.
The draft rule however, seeks to improve economic efficiency by providing Network Service Providers (NSPs) with guidance on what constitutes a ‘material change in circumstances’, which in turn, helps inform their decision-making as to when the RIT should be reapplied or, when further analysis should be undertaken.
If there has been a material change in circumstances, the draft rule requires proponents of major projects to propose the course of action that should follow. It would ensure the reapplication of the RIT - the default course of action under the current provisions - is a last resort. This would improve the outcomes for consumers by balancing the timely and economic delivery of network projects.
The Commission welcomes submissions on this draft determination and more preferable draft rule by 1 September 2022.
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