Rule Change: Completed
Overview
On 27 October 2022 the Commission published the final determination and more preferable final rule on the Material change in network infrastructure project costs rule change.
The final rule aims to provide clarity and transparency on the process for determining whether a material change in circumstances has occurred during the Regulatory Investment Test (RIT) process. 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.
Overview of the final rule
The final rule is designed to add clarity and transparency 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 final rule are that it:
- requires all RIT proponents to consider whether there has been a material change in circumstances for the project subsequent to the completion of the RIT
- requires RIT proponents (other than the Australian Energy Market Operator where it is the sole RIT proponent) 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
- requires RIT proponents, if they consider there has been a material change in circumstances (which would include the activating of a reopening trigger), to notify the AER and propose a course of action to reconsider the extent to which the preferred option previously identified through the RIT is likely to remain the most net beneficial option in light of the changed circumstances
- requires the AER to approve or reject and modify the RIT proponent’s proposed course of action
- requires proponents of contingent projects, at the time of submitting the contingent project application (CPA), to provide a separate statement to the AER confirming whether or not there has been a material change in circumstances, including supporting analysis, and (if relevant) confirming that the AER was notified of any material change in circumstances and outlining the course of action that was undertaken
- clarifies the rules governing the AER guidelines for RITs to support strengthened guidelines for cost estimate development.
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 the uncertainty in transmission planning and investment. The Consultation paper can be found on the Transmission 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 related to cost estimate accuracy that are raised by the Material rule change request. The roundtable included presentations from the rule change proponents, AEMO, AER and the AEMC. Slides from the roundtable are available below.
On 7 July 2022 the Commission published its draft determination and more preferable draft rule.
On 25 August 2022 the Commission held a virtual public forum on the draft determination. Slides for the forum are available below.
Extensions
On 13 October 2022 the Commission extended the period of time for making a final determination on the Material change in network infrastructure project costs rule change request under section 107 of the National Electricity Law.
This follows earlier extensions under section 107 of the National Electricity Law on 12 April 2022, and 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 (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.