On 1 August 2022, the AER received a notice of dispute from Public Interest Advocacy Centre (PIAC) disputing conclusions made in Transgrid’s Project Assessment Conclusions Reports (PACR) for the following regulatory investment tests for transmission (RIT-T):
- Maintaining Reliable Supply to the North West Slopes Area (NWS); and
- Maintaining Reliable Supply to the Bathurst, Orange and Parkes Areas (BOP)
PIAC raised the dispute under clause 5.16B of the National Electricity Rules (NER) on the grounds that Transgrid may have incorrectly applied the RIT-T in both the NWS PACR and the BOP PACR. PIAC contends that:
- The scenarios used to assess the costs and market benefits for each credible option are not reasonable, or have not been reasonably weighted. This is because the assumptions and inputs relating to: network capital costs, demand forecasts, VCR and discount rates, are incorrect, implausible or outside of what can be assumed with reasonable confidence.
- The use of these incorrect or implausible assumptions, and the unreasonable weighting of the scenarios, may have materially influenced timing of investment, ranking of the credible options and basis for any investment.
Determination
On 29 November 2022, following a review of the dispute and further information provided by Transgrid, the AER finds that Transgrid did not apply both the NWS and BOP RIT-T PACRs (collectively PACRs) in accordance with the National Electricity Rules, specifically in relation to its selection of reasonable scenarios and the discount rate.
Accordingly, we require Transgrid to amend its PACRs and address matters set out in our determination which relate to selection of reasonable scenarios and discount rate, including as required, supporting economic and sensitivity analysis to test the robustness of the RIT-T outcomes for both projects.
We also recommend that Transgrid amend both PACRs to provide additional information in relation to calculation of the VCR values, methodology used to estimate capital costs of credible options, and basis for including forecast electrical loads across the scenarios.
Transgrid is required to amend its PACRs by 1 February 2023.