On 5 October 2018, we released our decision granting SA Power Networks’ application for a ring-fencing waiver. The waiver permits SA Power Networks to continue serving as the counterparty for 21 construction and maintenance contracts.
We granted a waiver on 18 December 2017 that exempts SA Power Networks from the obligation to legally separate distribution and non-distribution services with respect to a number of infrastructure construction and maintenance contracts. The waiver expired on 30 September 2018 and was granted pending advice from the Australian Taxation Office on potential tax liabilities associated with novating the contracts to an affiliated entity. Under clause 3.1 of the Electricity Distribution Ring-fencing Guideline, DNSPs must provide non-distribution services from a legally separate affiliated entity.
On 3 September, SA Power Networks submitted an application to extend the waiver. SA Power Networks stated that it received advice from the ATO which indicated that transferring the contracts to an affiliated entity may create a tax liability. During the period of the original waiver, SA Power Networks identified that it had omitted five contracts that also required a waiver and included these contracts in its application. The AER has therefore decided to issue a new ring-fencing waiver that covers both sets of contracts.
Our decision is to grant SA Power Networks a waiver until 30 June 2021, when the final contract expires. Our Final Decision outlines the reasons for granting the waiver.