Rule Change: Open

Overview

On 14 April 2022, the Commission extended the period of time for making the draft determination on the Material change in network infrastructure project costs rule change request under section 107 of the National Electricity Law. The draft determination is now scheduled to be published on 7 July 2022.
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Extension of time

On 14 April 2022, the Commission extended the period of time for making the draft determination on the Material change in network infrastructure project costs rule change request under section 107 of the National Electricity Law. The draft determination is now scheduled to be published on 7 July 2022.

This further extension allows more time to consider the complexity of issues raised by the rule change request and enables the Commission to align the rule change request with stage 3 of the Transmission planning and investment review (TPIR), which includes an examination of the economic assessment framework.  

This follows an earlier extension under section 107 of the National Electricity Law on 30 November 2021. 

Overview

On 15 February 2021, the AEMC received a rule change request from Energy Users Association of Australia (EUAA), Delta Electricity, Major Energy Users, Inc, ERM Power Limited (now Shell Energy Operations Pty Ltd) and AGL Energy Limited to amend the National Electricity Rules. The request proposes that, unless an exemption is granted by the AER, a proponent must reapply the regulatory investment test (RIT) if, following completion of the RIT, the estimated cost of a transmission or distribution project materially increases. 

Under the 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 which means the preferred option identified in the final RIT report is no longer the preferred option.

The rule change proponents consider that this does not adequately protect consumer interests. To address this, they proposed the following changes: 

A RIT proponent must reapply the RIT if, following completion of the RIT, its project’s costs have increased by 10 per cent (for larger transmission and distribution projects) or 15 per cent (for smaller transmission and distribution projects), unless an exemption is granted by the AER. 

The AER may determine that a proponent is not required to reapply the RIT (or is only required to repeat part of the RIT). The AER would have 30 days from the date of publication of the revised project cost estimate to make and publish its determination. 

Project EnergyConnect (PEC) should be required to update its final RIT-T report to take account of material cost increases that have occurred since completion of the RIT. 

AER guidelines should be amended to require proponents to develop more rigorous cost estimates for the final RIT report, thereby reducing the risk that the RIT will need to be reapplied as a result of material cost increases.

A copy of the rule change request is available below.


Stakeholder engagement

On 19 August 2021, the AEMC published a consultation paper for the Transmission planning and investment review (Transmission Review). Consultation on this rule change request commenced as part of the Transmission Review as both involve managing uncertainty in transmission project planning and investment. The consultation paper can be found on the Review’s project page.  Chapter 5 of the consultation paper identified and discussed key issues arising from the rule change request.

Submissions closed on 30 September 2021 and are available below.   

The Commission held a directions forum on 13 December 2021 covering both the Review and the rule change request. Slides from the forum are available below.  
The Directions forum marked the completion of Stage 1 of the Review (focused on identifying key issues) and the commencement of Stage 2 (developing initial solutions) and Stage 3 (developing longer term solutions).

On 16 February 2022, the Commission hosted an online roundtable to explore issues regarding cost estimate accuracy that are raised by the Material change rule change request. The roundtable included presentations from the rule change proponents, AEMO, AER and the AEMC. Slides from the roundtable are available below.
 

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Documentation