AER approves reduced costs for HumeLink Stage 2

The Australian Energy Regulator (AER) today released its decision for Stage 2 of Transgrid’s Contingent Project Application for the HumeLink project. 

In making the decision, AER Chair Clare Savage said that the AER had undertaken a rigorous assessment of proposed costs to ensure consumers pay no more than necessary for delivery of the project. 

As a result, the AER accepted project costs that were $314.4 million less than what was originally proposed by Transgrid in its application, approving $3,964.8 million in capital expenditure compared with Transgrid’s proposed capital expenditure of $4,279.1 million (later revised to $4,173.4 million after accounting for new information). 

HumeLink is a proposed 500 kV transmission line that will expand the transmission network in New South Wales, and is an actionable project under the Integrated System Plan. 

The project will reinforce the grid, and provide electricity customers with increased access to generation and storage opportunities in Southern and Southwest New South Wales. 

“While HumeLink is a complex project of national significance, we recognise that it affects landholders and local communities on the transmission route and impacts electricity bills,” Ms Savage said. 

“There has been considerable stakeholder interest in this project and a diverse range of views were put forward throughout our consultation process. We valued the input of all stakeholders and sought to balance the breadth of interests and feedback in our decision-making. 

“We are conscious that this decision comes at a difficult time for energy consumers, with many customers facing challenges to absorb higher electricity prices in the current economic climate." 

The AER noted in its decision that it was critical for Transgrid to continue to engage with communities to achieve and maintain their support in delivering the HumeLink project. 

“We expect Transgrid to build and maintain social licence throughout the life of this project and respond to community feedback.

“This includes undertaking meaningful and high-quality engagement, as well as providing communities with additional benefits and activities to recognise the impact and costs borne by local communities as the project progresses,” Ms Savage said. 

The AER accepted all of Transgrid’s proposed costs for engagement and social licence activities. 

In conducting a review of Transgrid’s Material Change in Circumstances assessment, the AER examined Transgrid’s analysis, considered stakeholder concerns, commissioned independent market modelling and considered alternative cost assumptions. As the preferred investment option did not change, the AER found that Transgrid’s opinion was not unreasonable. 

Following the AER’s decision to approve reduced costs for Stage 2 of HumeLink, Transgrid will be able to deliver the remainder of the HumeLink project.

Read the full decision

Notes to Editors

Contingent Project Application HumeLink Stage 2 

The AER is required by the National Electricity Rules to assess a contingent project application from the network business and make a decision on the efficient costs for the project to ensure consumers pay no more than necessary. 

Transgrid submitted its stage 2 contingent project application for $4,279.1 million ($2022–23) in capital expenditure and $28.5 million of incremental operating expenditure on 22 December 2023. 

In the course of the AER’s assessment, Transgrid provided updated cost estimates for some types of capital expenditure, including tendered works, risk costs and biodiversity offset costs. This reduced its proposed capital expenditure to $4,173.4 million. 

This followed the AER’s decisions on the early works component of the HumeLink Contingent Project Application in 2022 (part 1) and 2023 (part 2), and was the final step in Transgrid’s application on the costs and revenues required to construct HumeLink.