Rule Change: Completed

Overview

On 4 April 2019 the AEMC made a final rule to streamline regulatory processes for three projects (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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On 4 April 2019 the AEMC made a final rule to streamline regulatory processes for three projects (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).

Post RIT-T regulatory steps

After a TNSP(s) has completed a regulatory investment test for transmission (RIT-T), but before the relevant network business is entitled to earn revenue that reflects the efficient cost of the investment, the National Electricity Rules (NER) provide for three processes to occur: 

  1. a dispute resolution process
  2.  a preferred option assessment process, and
  3.  where the RIT-T project is a contingent project, a contingent project assessment process to determine the revenue adjustment required to reflect the efficient costs associated with the contingent project. 

Final rule 

For the relevant RIT-Ts covering the VNI and QNI upgrade projects
The final rule allows the relevant TNSPs to submit a request for a RIT-T preferred option assessment while the 30 day dispute notification period is still running. The AER cannot make a determination on a preferred option if a dispute is raised and has not been resolved.

In order for the relevant TNSPs to be able to submit the preferred option assessment request early, the RIT-T preferred option needs to fall within the definition of the QNI and VNI contingent projects identified in the relevant TNSPs’ revenue determinations. 

For the relevant contingent projects covering the VNI and QNI upgrades and Project EnergyConnect
The final rule allows the relevant TNSPs to submit an application for a contingent project revenue adjustment before the AER has made a RIT-T preferred option determination. The AER cannot make its revenue decision before the preferred option determination is made.

In order for the relevant TNSPs to be able to submit the contingent project application early, the application needs to cover the QNI, VNI and South Australia-New South Wales interconnector contingent projects identified in the relevant TNSPs’ revenue determinations. 

The final rule does not remove or change any of the regulatory steps for these projects other than to allow them to run concurrently. 

Rule change request

On 21 December 2018 the AEMC received a rule change request from Dr Kerry Schott AO, Chair of the Energy Security Board, that sought to streamline three post RIT-T regulatory processes for minor upgrades to QNI and VNI, identified as group 1 projects  in the ISP (Early implementation of ISP priority projects rule change request). On 7 February 2019 the AEMC received an additional rule change request from Dr Kerry Schott AO that sought to streamline two post RIT-T regulatory processes for Project EnergyConnect, identified as a group 2 project in the ISP (ISP priority projects – SA Energy Transformation rule change request).

On 14 March 2019 the Commission consolidated these two rule change requests because they both sought to enable processes that are undertaken after a RIT-T has been completed to be done concurrently, rather than one after the other.    

Consultation

A consultation paper was published on 24 January 2019 for the Early implementation of ISP priority projects rule change request. A further consultation paper was published on 21 February 2019 for the ISP priority projects – SA Energy Transformation rule change request. Following consolidation of these two rule change requests, submissions closed on 21 March 2019. Twenty submissions to the consultation papers were received and are available below.

Expedited process

The rule change request was considered non-controversial and the AEMC followed an expedited rule making process. No objections to the expedited process were received.

The final rule will commence on 11 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 

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

The final rule completes 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. The Commission has commenced work to progress the other recommendations it made in the final report to better coordinate investment in transmission infrastructure and new generation through the Coordination of generation and transmission investment implementation - access and charging review. This work is focused on examining how the risk of transmission investment can be more appropriately placed with market participants, rather than consumers, through reforms to current transmission access and charging arrangements in the national electricity market.

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. The final determination is due to be published by 2 May 2019.
 

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