On 31 July 2024, the AER initiated a review of the cost thresholds associated with regulatory investment tests and annual price reports. The review will be conducted in accordance with clause 5.15.3 of the National Electricity Rules (NER).
On 12 November 2024, the AER published a final determination on the 2024 cost threshold review for the regulatory investment test for transmission (RIT-T) and the regulatory investment test for distribution (RIT-D) (collectively RITs). Broadly, the AER's draft determination is that if the estimated capital cost of the investment option:
- Exceeds $8 million, a RIT-T applies
- Falls below $54 million, a RIT-T proponent can skip the ‘project assessment draft report’ consultation step
- Exceeds $7 million, a RIT-D applies
- Falls below $14 million, a RIT-D proponent can skip the ‘draft project assessment report’ consultation step
- Falls below $28 million, a RIT-D proponent can include its ‘final project assessment report’ as part of its ‘distribution annual planning report’
- exceeds $103 million, a RIT-T or RIT-D proponent must include reopening triggers applying to the RIT-T or RIT-D project.
- Exceeds $300,000, a network business can combine information in its annual planning report for assets it expects to retire or de-rate
- Exceeds $3 million, a distribution network business is required to include, in its distribution annual planning report, committed investments that address an urgent or unforeseen network issue.
Stakeholder submissions
The AER received 3 written submissions to the draft determination.
These submissions are available on the draft determination page and we have responded to points raised in these submissions in the final determination.
Background
Every 3 years the AER must undertake a review of the changes in the input costs used to calculate the estimated capital costs in relation to transmission investment for the purposes of determining whether the cost thresholds need to be changed to maintain appropriateness over time by adjusting those cost thresholds to reflect any increase or decrease in the input costs since the date of the previous review.
The RITs are cost-benefit tests that network businesses must undertake before building electricity network infrastructure. Network businesses are required to apply the RITs in instances where the capital costs of proposed transmission or distribution investments are above certain cost thresholds. The NER requires the AER to undertake a cost thresholds review every three years to ascertain whether in light of changes to input costs, the thresholds listed in clause 5.15.3 of the NER need to be amended to maintain their appropriateness.
When reviewing the RIT cost thresholds, we also review the cost thresholds under S5.8(g) and S5.8(b2)(4) of the NER, which concern how distribution businesses should report on committed investments and network assets in their distribution annual planning reports.