The Australian Energy Regulator has issued its final decision on Murraylink’s proposed revenue proposal. Murraylink is the 220MW capacity interconnector that links the South Australian and Victorian regions in the National Electricity Market.
Revenues will largely stay the same over the coming five-year period, from 1 July 2013 to 30 June 2018.
“The impact from this decision on the average electricity bills in South Australia is minimal,” AER Chairman Andrew Reeves said.
The balance of risk and reliability has been taken into account in delivering this decision. Murraylink is a stable network, requiring only ongoing maintenance and operation to ensure good working order, with some capital needs for upgraded equipment over the next five years.
The AER will also apply the market impact component of the service standards scheme to Murraylink for the first time. This was included to create an incentive for Murraylink to ensure availability to transfer capacity throughout the national market.
“This is a reward-only scheme that will ensure customers get value from the interconnected market,” Mr Reeves said.
“Murraylink is dispatched by the system operator to ensure the continuous flow of electricity between South Australia and the eastern states. This puts wholesale customers in touch with the cheapest generation, which ultimately benefits all electricity users.”
The AER has set revenues of $68 million, similar to the amount Murraylink sought in its revenue proposal.
“The return on assets is the main driver of revenues and therefore interconnection charges. The AER has set Murraylink’s benchmark financing needs at 7.5 per cent.”
The release of the AER’s final decision follows an eleven month process of assessing Murraylink’s revenue proposal which included the spending proposal for the development, operation and maintenance of the interconnector. The process involved the release of the AER draft decision in November 2012 and a revised revenue proposal from Murraylink in January 2013.
“The decision ensures Murraylink can continue providing services that support the operation of a fully integrated national electricity market,” Mr Reeves said.