Rule Change: Open

Overview

On 7 July 2022 the Commission published the draft determination and a more preferable draft rule on the Material change in network infrastructure project costs rule change.
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On 7 July 2022 the Commission published the draft determination and a more preferable draft rule on the Material change in network infrastructure project costs rule change.

The draft rule aims to provide clarity on the process for determining whether a material change in the circumstances has occurred for the Regulatory Investment test (RIT). In addition, the rule also seeks to improve cost estimate accuracy by clarifying the rules governing the guidelines for RITs in order to support strengthened guidelines for cost estimate development.

The Commission will be holding a virtual public forum on the draft determination on 25 August 2022. 
Please register for the forum here.   

 

Stakeholders are invited to make written submissions to the draft determination by 1 September 2022.

Overview of the draft rule  

The draft rule is designed to add clarity to the process for determining whether a material change in circumstances has occurred and to improve cost estimate accuracy during the RIT process.

The key features of the more preferable draft rule are that it:

  • requires all RIT proponents to consider whether there has been a material change in circumstances, including a change in the identified need, for the project subsequent to the completion of the RIT
  • requires RIT proponents (other than AEMO) of projects with an estimated cost of greater than $100 million to develop reopening triggers which would clearly indicate whether there was subsequently a material change in circumstances, such as a change to the credible options considered in the RIT or to the ranking of these options
  • requires RIT proponents, if they consider either there has been a change to the identified need or a reopening trigger has been triggered, to inform the AER and propose a course of action
  • allows the AER to reject and modify the RIT proponent’s proposed course of action
  • requires proponents of contingent projects to state in their application to have their revenue determination amended to provide for additional expenditure whether or not there has been a change in the identified need or a reopening trigger has been triggered, provide supporting analysis, and (if relevant) outline the course of action that was undertaken
  • clarifies the rules governing the AER guidelines for RITs to support strengthened guidelines for cost estimate development.

The more preferable draft rule is different to the proponents’ rule change request in that it requires certain RIT proponents to develop reopening triggers to determine whether the preferred option is no longer the most net beneficial option. Instead of requiring the reapplication of the RIT as the default option, the draft rule allows a RIT proponent to propose the course of action that should follow if a reopening trigger has been triggered enhancing flexibility and avoiding duplication of processes.

Consultation process

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.  

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.

Extension

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 to 7 July 2022.

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

Background

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. 

A copy of the rule change request is available below.

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Documentation