The Australian Energy Regulator has published new consultation arrangements that apply when electricity distribution network businesses consider building new infrastructure.
“The Regulatory Investment Test for Distribution will support a clear and transparent assessment and consultation process for network businesses planning to invest in new network infrastructure,” AER Chairman Mr Andrew Reeves said.
The Regulatory Investment Test for Distribution requires network businesses to publish the options considered when there is a need to fund an expansion to existing network capacity. It will place non-network solutions, such as demand-side management or local generation, on a level playing field with network options.
“This will prevent consumers funding costly network upgrades when there are more efficient solutions. The community is looking for assurance that network businesses have considered alternatives before spending money on network upgrades to meet electricity demand. The Regulatory Investment Test for Distribution supports this,” Mr Reeves said.
The Regulatory Investment Test for Distribution will require network businesses to consider all credible network and non-network options when choosing how to meet future electricity demand. It will also provide greater transparency around distribution business planning and decision making. It complements a similar test for transmission businesses published in 2010.
After a network business has published information on the need for network expansion and has received feedback from interested parties, it will be required to publish a final project assessment report. This report will transparently assess which option the network business considers will deliver the maximum economic benefits. The AER has provided guidance on how businesses should calculate these economic benefits and what should be included in the assessment.
The publication of the Regulatory Investment Test for Distribution forms part of the AER’s Better Regulation reform program. The Better Regulation program focuses heavily on improving consultation with the community through assisting network businesses to develop consumer engagement strategies and through the appointment of a Consumer Challenge Panel.
The Better Regulation program will also deliver improved approaches to assessing spending proposals from network service providers and setting the return they may earn on network investments.
The AER sets the charges for electricity networks and for most gas networks in the eastern and southern Australian states.
The Regulatory Investment Test for Distribution is available on the RIT-D web page.