On 28 April 2020, the AER published its final decision in relation to TransGrid's QNI minor upgrade contingent project application.
Our decision departs from TransGrid's application by providing for a slightly reduced forecast of total capital expenditure required to deliver the project of $218 million. This reflects a lower estimate of internal project management costs required to deliver the project, partially offset by the cost of an additional capacitor bank at the Armidale substation that we consider should be included within the scope of this project. As a result, we have determined that TransGrid can recover $28.2 million in incremental revenue from customers over the 2021-22 and 2022-23 years, increasing transmission charges by approximately 1.7 per cent.
The QNI minor upgrade contingent project will expand the transmission transfer capacity between New South Wales (NSW) and Queensland in the near term. TransGrid's QNI minor upgrade project was identified as a priority investment in the Australian Energy Market Operator's 2018 Integrated System Plan (ISP) and the draft 2020 ISP, published on 12 December 2019. The contingent project is consistent with the preferred investment option identified through the Expanding NSW-QLD Transmission Transfer Capacity Regulatory Investment Test for Transmission (RIT-T) process. This investment will benefit consumers and producers of electricity by deferring the need to build new generation and storage capacity in NSW, as well as allowing for more efficient sharing of generation across the NEM, and supporting the ongoing energy market transition.
Background
On 17 January 2020, TransGrid submitted an application to the AER seeking an increase in its allowed revenue to expand the transmission transfer capacity between NSW and Queensland. The QNI minor upgrade project involves:
- uprating the Liddell to Tamworth 330 kV lines; and
- installing new dynamic reactive support at Tamworth and Dumaresq, and shunt capacitor banks at Tamworth, Armidale and Dumaresq.
Funding for a 'contingent project' is permitted under clause 6A.8.2 of the National Electricity Rules through an adjustment to the maximum allowed revenue under TransGrid's 2018-23 revenue determination. Network revenue determinations are made by us and set out the revenue network businesses can collect from electricity consumers through charges within a defined period.
The final decision made in relation to TransGrid's QNI minor upgrade contingent project application follows a determination we made on 30 March 2020, where we determined that the preferred option identified in the Expanding NSW-QLD Transmission Transfer Capacity RIT-T satisfied the requirements of the RIT-T.