The AEMC has today released a consultation paper on issues raised by transmission networks in NSW and SA about the impact of regulation on their ability to finance large-scale transmission projects under the Integrated System Plan (ISP).
TransGrid (NSW) and ElectraNet (SA) have requested a participant derogation which, if approved, would see the regulatory framework modified in relation to their ISP projects. These include:
- Project EnergyConnect, a 330kV interconnector between NSW and South Australia
- Humelink, an interconnection project to support Snowy 2.0
- Victoria-NSW interconnection (VNI) upgrades.
The transmission networks have suggested the revenue setting arrangements under the rules should be modified for their ISP projects because the rules affect cash flows and make obtaining financing difficult.
They nominate two aspects in particular: the way the regulatory asset base (RAB) is indexed and the fact that depreciation is recovered when projects are commissioned rather than during the construction phase.
They argue the impact of these aspects are amplified for large projects with long asset lives. TransGrid estimates the total investment required to deliver its share of ISP projects is between $9 and $10 billion over the next 10 years. ElectraNet’s estimates its investment to be $474 million.
If made, the rule would affect all TransGrid’s and ElectraNet’s actionable ISP projects approved through the regulatory process after 1 September 2020, in NSW and SA.
Issues for consideration
In considering these requests, the Commission has asked stakeholders to consider questions such as what the impact on consumers would be, the impact of any change on transmission network service providers being able to complete ISP projects on time, what impediments investors may face in relation to ISP projects, and what options – other than the proposed changes to the regulatory framework – could be considered to ensure timely investment and delivery of ISP projects.
When they submitted their requests in October, TransGrid and ElectraNet requested the Commission progress the rule change requests under an expedited (8 week) process on the basis that they are an urgent rule under the National Electricity Law (NEL). The Commission is not satisfied that the requests meet the test for an urgent rule in the NEL and have initiated the requests under the standard rule change process. However, these requests will be treated as priority and the Commission is working towards a final decision in March 2021.
The Commission is interested in hearing from stakeholders on the issues raised in these rule change requests. Submissions close on 3 December.
Media: Kellie Bisset, Media and Content Manager M: 0438 490041