The Australian Energy Regulator (AER) has published a consultation paper on proposed amendments to the cost benefit analysis and regulatory investment tests (RIT-T & RIT-D) application guidelines.
The paper seeks stakeholder views on:
- reopening trigger events that will lead to a material change in circumstances
- cost estimation in regulatory investment tests, including the methodologies that network businesses use and whether the AER should provide binding guidance
- scope of early works activities that should be included in the guidance.
This guideline review covers amendments resulting from the Australian Energy Market Commission’s material change in network infrastructure project costs rule determination, and the Transmission Planning and Investment (TPI) Review Stage 2 final report.
Invitation for submissions
We welcome submissions from interested stakeholders in response to the questions raised in this consultation paper, or any other matters relevant to this review by 19 June 2023. Submissions or requests for alternative methods of submissions, should be emailed to AERpolicy
aer [dot] gov [dot] au (AERpolicy[at]aer[dot]gov[dot]au).
Background
The Regulatory Investment Test (RIT) is a cost-benefit test that network businesses (RIT proponents) must undertake before building electricity network infrastructure. The purpose of this test is to assess a range of credible options that could address an identified need in the electricity network, and then identify the credible option that maximises the net economic benefits in the National Electricity Market.
In accordance with the National Electricity Rules (NER), the AER are responsible for establishing and maintaining guidelines on the application of the RIT. While the RIT instruments for transmission and distribution provide the framework for the cost-benefit test, the RIT application guidelines provide guidance on:
- The purpose of RITs and projects subject to assessment.
- The cost benefit assessment required to be undertaken in the RIT, including guidance on the selection of reasonable scenarios, selection of credible options and the preferred option, and treatment of uncertainty risks and externalities.
- The process to follow in applying the RITs by describing the stakeholder consultation steps prescribed in the NER, as well as the process for reapplying a RIT following a material change in circumstances.
- Calculating different classes of market benefits, using worked examples. This includes benefits associated with voluntary load curtailment, involuntary load shedding, costs to other parties, timing of expenditure, option value and energy losses.
- The dispute resolution process. This includes guidance on the requirements and procedure for making a RIT dispute, along with how we will make a determination on any dispute.