The Australian Energy Regulator (AER) today released its preliminary position on the costs for the proposed South Australia – New South Wales interconnector, with a final decision to be made once the businesses commit to proceed with the project.
AER Chair Clare Savage said that consumers are at the heart of the regulator’s work on the proposal for Project EnergyConnect.
“The simple reality is that consumers should not be charged for a significant project until the businesses have committed to build it,” Ms Savage said.
“While we have received contingent project applications from TransGrid and ElectraNet, the AER cannot formally make a decision until a commitment to the project is made.
“The TransGrid board has made its commitment to the project conditional on a number of factors, including its ability to finance the project which they consider relies on rule changes by the Australian Energy Market Commission (AEMC).”
The AEMC expects to make final determinations on these rule change requests in March 2021.
ElectraNet and TransGrid have applied to the AER to amend their existing revenue determinations to fund the efficient costs of delivering Project EnergyConnect in the 2018–23 regulatory control period.
“This is a complex project involving a wide range of stakeholders. We have been progressing our part in the process as quickly as possible,” Ms Savage said.
“We have undertaken a rigorous assessment of the proposed costs and our preliminary assessment is that the prudent and efficient capital cost for the project is $2.15 billion, a 9 per cent reduction from the $2.4 billion proposed by TransGrid and ElectraNet.
“If and when TransGrid and ElectraNet are in a position to fully commit to this project, we stand ready to make our final regulatory decision on the costs of the project.
“We are committed to working with businesses and government to ensure that consumers pay no more than necessary for this project and to making a timely decision once we are satisfied the relevant triggers have been met.”
The AER welcomes feedback from interested stakeholders on its preliminary position.
Notes to Editors
The following table represents the AER’s preliminary position on the costs of Project EnergyConnect.
| TransGrid | ElectraNet | |
|---|---|---|
| Preliminary estimate of forecast capex | $1,695.7 million (10 per cent reduction from $1,894.6 million proposed) | $456.8 million (3 per cent reduction from $468.6 million proposed) |
| Incremental revenue (2018-23) | $59 million $132 million (rule change) | $10.2 million $23.8 million (rule change) |
| Indicative increase in residential bills (2018-23) AER estimated impact on the transmission component of residential electricity bills | $5 p.a. $11 p.a. (rule change) | $2 p.a. $6 p.a. (rule change) |
| Indicative increase in residential bills (2023-28) AER estimated impact on the transmission component of residential customer electricity bills | $19 p.a $26 p.a (rule change) | $15 p.a. $19 p.a (rule change) |
* Some numbers are presented both in terms of a decision under the current rules and the decision if the financeability rule change proposals are accepted.
About the AER
The AER works to make all Australian energy consumers better off, now and in the future.
- We regulate electricity networks and covered gas pipelines, in all jurisdictions except Western Australia. We set the amount of revenue that network businesses can recover from customers for using these networks.
- We enforce the laws for the National Electricity Market and spot gas markets in southern and eastern Australia. We monitor and report on the conduct of energy businesses and the effectiveness of competition.
- We protect the interests of household and small business consumers by enforcing the Retail Law. Our retail energy market functions cover New South Wales, South Australia, Tasmania, the ACT and Queensland.
- We drive effective competition where it is feasible and provide effective regulation where it is not. We equip consumers to participate effectively, including through our Energy Made Easy website, and protect those who are unable to safeguard their own interests. We use our expertise to inform debate about Australia’s energy future.