On 29 August 2024, the AER published a draft determination on the 2024 cost threshold review for the regulatory investment test for transmission (RIT-T) and the regulatory investment test for distribution (RIT-D) (collectively RITs). Broadly, the AER's draft determination is that if the estimated capital cost of the investment option:

• Exceeds $8 million, a RIT-T applies 
• Exceeds $7 million, a RIT-D applies 
• Falls below $54 million, a RIT-T proponent can skip the ‘project assessment draft report’ consultation step 
• Falls below $14 million, a RIT-D proponent can skip the ‘draft project assessment report’ consultation step 
• Falls below $28 million, a RIT-D proponent can include its ‘final project assessment report’ as part of its ‘distribution annual planning report’ 
• Exceeds $300,000, a network business can combine information in its annual planning report for assets it expects to retire or de-rate 
• Exceeds $3 million, a distribution network business is required to include, in its distribution annual planning report, committed investments that address an urgent or unforeseen network issue. 

Background

Every 3 years the AER must undertake a review of the changes in the input costs used to calculate the estimated capital costs in relation to transmission investment.

The RITs are cost-benefit tests that network businesses must undertake before building electricity network infrastructure. Network businesses are required to apply the RITs in instances where the capital costs of proposed transmission or distribution investments are above certain cost thresholds. The NER requires the AER to undertake a cost thresholds review every three years to ascertain whether in light of changes to input costs, the thresholds listed in clause 5.15.3 of the NER need to be amended to maintain their appropriateness. 

The last RIT cost threshold review was undertaken in 2021 and determined that if the estimated capital cost of the investment option:

• Exceeds $7 million, a RIT-T applies 
• Exceeds $6 million, a RIT-D applies 
• Falls below $46 million, a RIT-T proponent can skip the ‘project assessment draft report’ consultation step 
• Falls below $12 million, a RIT-D proponent can skip the ‘draft project assessment report’ consultation step 
• Falls below $24 million, a RIT-D proponent can include its ‘final project assessment report’ as part of its ‘distribution annual planning report’ 
• Exceeds $200,000, a network business can combine information in its annual planning report for assets it expects to retire or de-rate 
• Exceeds $2 million, a distribution network business is required to include, in its distribution annual planning report, committed investments that address an urgent or unforeseen network issue. 

When reviewing the RIT cost thresholds, we also review the cost thresholds under S5.8(g) and S5.8(b2)(4) of the NER, which concern how distribution businesses should report on committed investments and network assets in their distribution annual planning reports.