The Australian Energy Regulator (AER) today published its determination in response to a dispute notice lodged by the Energy Users Association of Australia (EUAA) (the disputing party). This notice disputed the conclusions made in Ausgrid’s final project assessment report (final report) for the regulatory investment test for distribution (RIT-D) associated with a project to address reliability in the Sydney Central Business District area (Sydney CBD). In particular, the EUAA contended that Ausgrid’s assumed Value of Customer Reliability (VCR) for the Sydney CBD RIT-D is inconsistent with the Sydney CBD VCR used by TransGrid and Ausgrid in their Powering Sydney’s Future regulatory investment test for transmission (RIT-T).
The AER finds that Ausgrid’s assessment of the Sydney CBD project was in accordance with the RIT-D requirements.
In conducting our review, we found that the final report for the Sydney CBD RIT-D provided limited sensitivity analysis and supporting justification for the choice of a reasonable estimate of the VCR. However, after taking into consideration additional information provided by Ausgrid and additional analysis undertaken by our consultant, we are satisfied that the selection of the preferred option and the timing of the project is not materially impacted by the choice of reasonable VCR estimates. Our determination that Ausgrid's decision was in accordance of the RIT-D requirements does not depend on the reasonableness of the specific VCR it applied. Given this, we do not consider our determination to be a precedent for determining VCR estimates. It should be noted that the AER has commenced a review of the methodology for determining VCR estimates.
We also consider that a robust cost benefit analysis presented in the final report and effective RIT-D consultation could have avoided the dispute and allowed a more timely completion of the RIT-D process. For future RIT-D consultation processes undertaken by network businesses, including Ausgrid, we expect that all supporting information and economic analysis be provided to ensure transparency and fully inform interested parties. We expect that a more transparent process would reduce the risk of unnecessary disputes being raised with the AER.
Background information on the AER’s decision
The Dalley Street zone substation (ZSS) and City East ZSS form part of the network that supplies the Sydney CBD. Ausgrid identified condition issues at both ZSSs, which if left unaddressed may increase the likelihood of equipment failure, leading to involuntary load shedding and breaches of reliability standards, alongside higher maintenance costs.
On 19 April 2018, Ausgrid commenced a RIT-D consultation process to identify the preferred option to maintain reliability of supply to Sydney CBD. This consultation concluded on 8 June 2018 with Ausgrid publishing a final report. Ausgrid's final report considered two credible options and concluded that option 2 would deliver the highest market benefits to satisfy the RIT-D as the preferred option. This option involved transferring the City East and Dalley Street ZSS loads to the neighbouring Belmore Park ZSS via one 2x10 duct bank along College Street, followed by decommissioning the two aging substations.
On 2 July 2018, the disputing party submitted a written dispute notice to the AER disputing the conclusions of Ausgrid's final report in accordance with Clause 5.17.5 of the National Electricity Rules.
Today’s AER determination concludes Ausgrid’s application of the RIT-D for the Sydney CBD project.