On 29 January 2009, the Commission gave notice under sections 102 and 103 of the National Electricity Law (NEL) making the National Electricity Amendment (Cost allocation arrangements for transmission services) Rule 2009 No 3 and related Rule determination. The Rule commenced operation on 13 February.

Background

On 18 January 2008, the National Generators Forum (NGF) lodged a Rule change proposal regarding the cost allocation arrangements for transmission services.

The proposal primarily relates to certain transmission services used by generators prior to commencement of the National Electricity Amendment (Economic Regulation of Transmission Services) Rule 2006 No. 18 and the cost allocation arrangements for those services.

The NGF considers that the current National Electricity Rules lead to the shifting of costs from historically shared transmission services to prescribed connection services as a result of a cost re-allocation or network reconfiguration undertaken for the benefit of network users generally.

The proposal also sought to clarify the regulated asset base (RAB) treatment of assets that were reconfigured and to remove the application of the Ring Fencing Guidelines to cost allocation.

The four main elements of the proposed Rule are the:

• clarification of existing prescribed transmission services under rule 11.6;
• application of cost allocation provisions to those services;
• prevention for the removal of assets from a transmission network service provider’s regulated asset base (RAB) due to reconfiguration; and
• application of transmission ring-fencing guidelines to cost allocation.

The Rule change proposal and accompanying documents are available below under Proposal Documents.

On 13 March 2008, representatives from the NGF made a presentation to the Commission. A copy of the presentation can be found below.

On 3 April 2008, the Commission published a notice under section 95 of the NEL advising of its intention to commence the Rule change process and initial consultation for this Rule change proposal.

The Commission invited interested parties to provide submissions on the Rule change proposal by 2 May 2008. The Commission had intended to publish a draft Rule determination on 11 July 2008.

On 3 July 2008, the Commission published a notice under section 107 of the National Electricity Law NEL extending the period for publication of the draft Rule determination for the Rule proposal dealing with Cost Allocation Arrangements for Transmission Services. The Commission considered that it was necessary to extend the publication period of the draft Rule determination due to complex issues associated with this Rule change proposal that were raised during the consultation process. These complex issues will require more time to conduct a detailed analysis of the Rule proposal The Commission was to publish the draft Rule determination by 31 July 2008.

On 24 July 2008, the Commission published a further notice under section 107 of the NEL extending the period for publication of the draft Rule determination. On 15 July 2008, the Commission published a supplementary submission from Grid Australia which put forward an alternative approach in relation to the issues raised by the NGF. The NGF has made a submission in response. The Commission considered it is necessary to extend the publication period of the draft Rule determination due to the complex issues that were raised in the supplementary submissions by Grid Australia and the NGF. These complex issues required more time to conduct a detailed analysis of the Rule proposal.

On 28 August 2008, the Commission gave notice under section 99 of the NEL of the making of the draft Rule determination and draft Rule for the NGF’s Rule change proposal relating to cost allocation arrangements for transmission services (Draft Rule).

The Draft Rule is a more preferable Rule. The Commission agreed with some of the NGF’s proposed changes in part and proposed other Rule changes to address concerns raised by stakeholder’s concerns. In summary, the Draft Rule:

• inserts a new clause 11.6.11 which grandfathers as ‘prescribed connection services’, connection services which were provided by assets that were in the regulatory asset base (or committed to be constructed) as at 9 February 2006;
• provides that the grandfathering under clause 11.6.11 of ‘prescribed connection services’ will end when the current term of existing connection agreements under which those services are provided expire or otherwise terminate; or the connection agreement has been amended at the request of the Transmission Network User for the purposes of altering the relevant service;
• specifies how the general provisions in Chapter 6A apply to ‘prescribed connection services’ to limit the assets which can be attributed to ‘prescribed connection services’ and allocating any shortfall to another category of prescribed transmission services; and
• inserts an additional provision to the effect that the Transmission Ring-Fencing Guidelines cannot require allocation of costs as between prescribed transmission services and negotiated transmission services, or between categories of prescribed transmission services in a manner which is inconsistent with the Cost Allocation Principles.

The draft Rule determination sets out the reasons why the Draft Rule satisfies the Rule making test. The Commission was satisfied that the Draft Rule will, or is likely to, contribute to the achievement of the National Electricity Objective better than the NGF’s Rule proposal. In brief, this is because the Draft Rule ensures a greater level of clarity and consistency across the Rules, including being more reflective of the underlying principles set out by the Commission in the National Electricity Amendment (Economic Regulation of Transmission Services) Rule 2006.

The Commission invited interested parties to provide submissions on the draft Rule Determination and Draft Rule by 10 October 2008. The Commission received four submissions.

In accordance with section 101 of the NEL, any interested person or body may have requested by 5 September that the Commission hold a pre-determination hearing in relation to the Draft Rule and draft Rule Determination. The Commission did not receive a request to hold a pre-determination hearing on this matter.

On 13 November 2008, the Commission published a notice under section 107 of the NEL extending the period for publication of the final Rule determination and final Rule on cost allocation arrangements for transmission services. The Commission considered that new and complex issues have been raised in the second round of consultation such that a material change in circumstances has occurred. The Commission considers that it was necessary to extend the period for publication of the final Rule determination and final Rule in order to assess these new and complex issues.

On 4 December 2008, the Commission published a notice under section 107 of the NEL extending the period for publication of the final Rule determination and final Rule on cost allocation arrangements for transmission services. The Commission considered that new and complex issues were raised in the second round of consultation such that a material change in circumstances occurred. The Commission considered it necessary to extend the period for publication of the final Rule determination and final Rule in order to assess these new and complex issues. The Commission intended to publish a final Rule determination and final Rule by 29 January 2009. On 29 January 2009, the Commission gave notice under sections 102 and 103 of the National Electricity Law (NEL) making the National Electricity Amendment (Cost allocation arrangements for transmission services) Rule 2009 No 3 and related Rule determination. The Rule commenced operation on 13 February.