Increases the current Regulatory Test thresholds applying to new small transmission network assets from 1 million dollars to 5 million dollars and new large transmission network assets from 10 million dollars to 20 million dollars;

Index the Regulatory Test's monetary thresholds to movements in the Producer Price Index; and

Require transmission network service providers (TNSPs) to disclose certain information on all proposed replacement network assets in excess of 5 million dollars in their Annual Planning Reports.

Background

On 21 November 2007, the Commission received a joint Rule change proposal from ElectraNet Pty Ltd, Powerlink Queensland, SP Ausnet, Transend Networks Pty Ltd and TransGrid (referred to as the Electricity Transmission Network Owners Forum (ETNOF)), relating to the augmentation asset thresholds under the Regulatory Test and information disclosure requirements for network replacements. ENTOF’s proposal seeks to:

• Increase the current Regulatory Test thresholds applying to new small transmission network assets from 1 million dollars to 5 million dollars and new large transmission network assets from 10 million dollars to 35 million dollars;
• Index the Regulatory Test’s monetary thresholds to movements in the Producer Price Index; and
• Require transmission network service providers (TNSPs) to disclose certain information on all proposed replacement network assets in excess of 5 million dollars in their Annual Planning Reports.

On 20 December 2007 the Commission published a notice under section 95 of the National Electricity Law (NEL) advising of its intention to commence the Rule change process and initial consultation on this Rule proposal.

The Commission invited interested parties to provide submissions on the Rule proposal by 15 February 2008.

On 3 April 2008 the Commission published a notice under section 107 of the NEL to extend the publication of the draft Rule determination for 10 weeks to 3 July 2008. The Commission considered it necessary to extend the publication of the draft Rule determination in order to sufficiently analyse and address complex issues necessary to finalise the draft Rule determination. The complex issues included the establishment of appropriate threshold values and further analysis into automatic indexation.

On 26 June 2008 the Commission published a further notice under section 107 of the NEL to extend the publication of the draft Rule determination from 3 July 2008 to 31 July 2008. The Commission considered it necessary to extend the publication of the draft Rule determination in order to sufficiently analyse and address complex issues necessary to finalise the draft Rule determination in order to sufficiently analyse and address complex issues necessary to finalise the draft Rule determination.

The Commission made this decision to analyse information it had received, which will assist it in formulating its views in relation to whether or not to increase the Regulatory Test thresholds.

On 31 July 2008, the Commission gave notice under section 99 of the NEL of the making of the draft Rule determination and draft Rule on a Rule change proposal submitted by ETNOF (now known as Grid Australia) relating to the regulatory test thresholds and information disclosure on network replacements.

The draft Rule accepts Grid Australia’s proposed Rule change with some key modifications and enhancements. In the draft Rule and draft Rule determination the Commission incorporates the elements of the proposal to:

• Increase the new small transmission network asset threshold from $1 million to $5 million;
• Provide for information disclosure on network replacements over $5 million; and
• Provide a mechanism to maintain the threshold values over time.

The key modifications proposed by the Commission are to:

• Raise the new large transmission network asset threshold from $10 million to $20 million (and not $35 million as proposed in the Rule change proposal);
• Provide for a three yearly review of threshold values to be conducted by the Australian Energy Regulator (and not automatic annual indexation);
• Remove the ability of the AER to change the amount of the asset thresholds that is provided for in the definition of new small transmission network asset;
• Require additional information to be provided routinely by TNSPs in respect of replacement transmission assets;
• Provide for VENCorp to publish the replacement transmission asset information in the Victorian APR and for SP AusNet to provide the relevant information by 28 February each year; and
• Clarify the meaning of the term “replacement network asset”.

The Commission considered that these modifications and enhancements better promote the National Electricity Objective.

The Commission invited interested parties to provide submissions on the draft Rule determination and draft Rule by 15 September 2008.

The Commission has also published a mark-up of the Rules incorporating the draft Rule.

On 23 October 2008 the Commission gave notice under sections 102 and 103 of the NEL making the National Electricity Amendment (Regulatory Test thresholds and Information Disclosure on Network Replacements) Rule 2008 and the corresponding Rule determination.

The Commission largely adopted Grid Australia’s proposed Rule but made some key modifications and enhancements arising out of its own analysis and in examining issues raised in submissions.

The Commission made the following minor amendments to the draft Rule in the Rule primarily as a result of issues raised in submissions:

• The definition of replacement transmission network asset has been amended to clarify the treatment of joint replacement and augmentation projects; and
• The AER’s ability to add or replace the monetary values for the thresholds with non-monetary specifications has been removed.