Rule Change: Open

Overview

This proposed rule change from Dr Kerry Schott AO seeks to streamline regulatory processes for three projects (minor upgrades to QNI and VNI, and the proposed interconnector between South Australia and New South Wales – Project EnergyConnect) identified by the Australian Energy Market Operator (AEMO) in its inaugural Integrated System Plan (ISP).
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This proposed rule change from Dr Kerry Schott AO seeks to streamline regulatory processes for three projects (minor upgrades to QNI and VNI, and the proposed interconnector between South Australia and New South Wales – Project EnergyConnect) identified by the Australian Energy Market Operator (AEMO) in its inaugural Integrated System Plan (ISP). 

Consolidation of Early implementation of ISP priority projects and ISP priority projects – SA Energy Transformation rule change requests

The Commission has consolidated the Early implementation of ISP priority projects rule change request and the ISP priority projects – SA Energy Transformation rule change request. They are now being considered as a single rule change request.

These two proposals have been consolidated because they both seek to enable processes that are undertaken by the Australian Energy Regulator (AER) after a regulatory investment test for transmission (RIT-T) has been completed to be done concurrently, rather than one after the other.    

Rule change requests

AEMO published the inaugural Integrated System Plan in July 2018. The ISP identifies transmission investments that AEMO states will be required in the national electricity market over the next 20-30 years.

The priority projects detailed in the ISP are those that AEMO considers should be progressed as soon as possible because they provide immediate benefits to the national electricity market (Group 1 projects). The Group 2 investment projects are of a larger scale and cost than those in Group 1. The ISP states that they require longer lead times to design and develop, but provide larger benefits if they have timely implementation. 

The  Energy Security Board considers it important that two of the Group 1 projects are able to be commissioned before the likely retirement of the Liddell generator in NSW in 2022:

  • A minor upgrade to the transfer capacity of the QLD-NSW interconnector (QNI)
  • A minor upgrade to the transfer capacity of the VIC-NSW interconnector (VNI)

Regulatory investment tests for the upgrades to QNI and VNI commenced in November 2018, however following the processes and timelines currently outlined in the National Electricity Rules (NER) would result in the likely Liddell generator retirement deadline not being met for either project. The ISP also includes a proposal for a new interconnector (known as Project EnergyConnect) between South Australia and New South Wales that would be built by the mid-2020s, subject to the necessary approvals being received.  

The regulatory investment test for Project EnergyConnect was completed on 13 February 2019.

Proposal to streamline regulatory approval processes

Under the NER, there are three regulatory processes that need to be undertaken by the Australian Energy Regulator (AER) after a regulatory investment test has been completed:

  • resolution of any disputes lodged in relation to the application of a regulatory investment test under clause 5.16.5
  • at the request of the regulatory investment test proponent, make a determination that a preferred option identified through a regulatory investment test process conducted by the relevant transmission business satisfies the test under clause 5.16.6
  • amend a transmission business’ revenue determination for a contingent project when an application to do so is received under clause 6A.8.2.

Currently under the NER, these processes must be conducted one after the other. The rule change request seeks to allow these processes to be conducted concurrently for the QNI and VNI minor upgrade projects to save time in the regulatory process. 

For Project EnergyConnect, the rule change request seeks to allow the preferred option assessment and the revenue assessment to be conducted concurrently to save time in the regulatory process, but it does not propose allowing the AER to commence the preferred option assessment while the dispute lodgement period is still open.

The proposed changes do not allow the AER to complete a step before the preceding step has also been completed. It only allows a step to be commenced before the preceding step has been completed. 

If made, and in the absence of a dispute notice being lodged, the proposed rule aims to reduce the time between the completion of the regulatory investment test and the AER's approval of revenue by six to eight months for the QNI and VNI minor upgrade projects, and by five to six months for Project EnergyConnect.

Timing for rule change request

As this rule change request is considered non-controversial, the AEMC is assessing the proposed rule under the expedited rule making process. 

Under an expedited rule making process, a final rule determination must be made within eight weeks of the initiation of the process.

As the consolidated rule change request brings together two rule change requests that were following different timelines, the timeline of the ISP priority projects – SA Energy Transformation rule change request will be followed for the consolidated rule change request as it was initiated later.

The key dates for stakeholders in this process are:

  • Submissions to the consultation paper for Early implementation of ISP priority projects rule change request were due by 21 February 2019 and can be found below.
  • Submissions to the consultation paper for the ISP priority projects – SA Energy Transformation rule change request due by (4 weeks):  21 March 2019
  • Stakeholders should use the project code ERC0258 when lodging a submission.
  • Publication of final determination: by 18 April 2019

Background

Energy Security Board's December 2018 report to the COAG Energy Council

At the COAG Energy Council meeting on 10 August 2018, the Energy Security Board was requested to report in December 2018 on:

  • how the Group 1 projects in the ISP could be delivered as soon as practicable
  • how Group 2 and 3 projects, should be progressed
  • how the ISP would be converted into an actionable strategic plan 

This rule change request relates to how the Group 1 projects in the ISP could be delivered as soon as practicable.

On 19 December 2018, the Energy Security Board provided a report to the COAG Energy Council outlining how the questions listed above should be addressed. Responding to the report, the COAG Energy Council agreed to a recommendation made by the Energy Security Board that a rule change request be progressed to allow the AER to undertake post RIT-T regulatory processes concurrently for the QNI and VNI minor upgrades identified as Group 1 projects in the ISP, reducing the time it would take to implement them.

Also at the COAG Energy Council meeting on 19 December 2018, Ministers tasked the Energy Security Board to consider how these reforms could be applied to other priority projects such as Project EnergyConnect.

Coordination of generation and transmission investment

This rule change request commences stage one (implement reforms that are necessary to advance ISP Group 1 projects) of the reforms to the transmission framework that the Commission recommended in the final report published as part of the Coordination of generation and transmission investment review.

Application period for contingent project revenue rule change request

The Commission is currently considering another rule change request from Dr Kerry Schott AO that seeks to change the NER so they no longer prevent transmission and distribution network businesses from submitting a contingent project application to the AER in the 90 business days before the end of a regulatory year, except where that regulatory year is the last year of a regulatory control period.

This rule change request was initiated on 7 March 2019 and is following the expedited process:

  • Objections to the expedited process being followed to be received by: 21 March 2019
  • Submissions to the consultation paper to be received by: 4 April 2019
  • Publication of final determination: by 2 May 2019 
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