What is the Regulatory Investment Test?

The Regulatory Investment Test (RIT) is a cost benefit analysis designed to identify the credible option that maximises the net economic benefit for an identified need. 

We maintain separate guidelines and instruments for RITs for transmission (RIT-T) and RITs for distribution (RIT-D), although their major objectives, consultation and reporting steps are broadly the same.  

Transmission

Go to the Guidelines and Instrument for the Regulatory Investment Test - Transmission

A farming crop with a transmission tower in the background

Distribution

Go to the Guidelines and Instrument for the Regulatory Investment Test - Distribution

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The steps involved

1. 

Identify a need for the investment, known as the "identified need".

2.

Identify a set of credible options to address the identified need.

3.

Characterise the base case (where no investment happens) against which to compare credible options.

4. 

Identify reasonable inputs to include in the cost benefit analysis.

5. 

Quantify the expected costs of each credible option.

6. 

Identify what classes of market benefits to quantify.

7. 

Estimate the expected market benefit of each credible option.

8. 

Rank each credible option and identify a preferred option.

RIT thresholds 

In some cases, such as when minor works or small-scale grid augmentation is required, a proponent may not have to undertake a RIT if the expected capital cost of the project is less than the current threshold value from our latest RIT thresholds review. 

Consistent with clause 5.15.3 of the National Electricity Rules (NER), we must undertake this review at least every 3 years to ensure the thresholds remain appropriate to the expected price of input costs like labour and materials for a project.

View the RIT thresholds


RIT disputes

Our guidelines also outline our dispute resolution process. More information on the RIT dispute process and a list of historical disputes can be found on the RIT disputes page. 

Go to RIT disputes

Regulatory Investment Test - Transmission

Download the RIT-T Instrument 

Clause 5.16.1 of the NER prescribes that we must maintain a document that provides detailed requirements to be followed by proponents in undertaking a RIT-T.

This instrument sets out:

  • definitions of key terms
  • documents a proponent must have regard to when completing a RIT-T (such as our guidelines)
  • differences in expectations between actionable (those identified in the ISP) and non-actionable RIT-T projects
  • classes of costs and benefits to include if material and the method to estimate the magnitude of market benefits
  • advice on implementing reasonable parameters such as discount rates, scenarios and states of the world.

Where the instrument sets out what is expected within a RIT-T, our guidelines expand on these requirements and provide guidance, examples and additional expectations to address all considerations of the instrument.

Download the RIT-T Guidelines

Our RIT-T application guidelines inform network businesses on the process for conducting a RIT-T for all projects not identified as actionable in the ISP. 

The RIT-T application guidelines enable a robust cost benefit analysis of the project consistent with the requirements of the NER and National Energy Objectives, and that publications and positions are predictable, transparent and consistent. The RIT-T application guidelines provide guidance on:

  • the RIT-T, its operation and application
  • the process to follow when applying the RIT-T
  • how we will address and resolve disputes raised on the application of the RIT-T.

RIT-T reports

There are 3 reports that may need to be completed as part of the RIT-T process:

Project specification consultation report (PSCR)

  • The PSCR contains high level information about the identified need, assumptions, technical characteristics and a description of all credible options.

  • The consultation period on this report must not be less than 12 weeks from the date AEMO publishes a summary to their website.

Project assessment draft report (PADR)

  • The PADR contains a detailed description of each credible option, a summary of submissions from the PSCR (if any), quantification of costs and material market benefits for each option, applicable methodologies used, the identification of the preferred option and RIT reopening triggers (if applicable).

  • It must be published within 12 months after the end of the PSCR consultation period. The consultation period for the PADR must be no less than 6 weeks.

  • The PADR may not be required in specific circumstances relating to the size or uncontroversial nature of the project.

Project assessment conclusions report (PACR)

  • The PACR identifies the preferred option.

  • It contains the relevant content from the PADR and a summary of, and response to, any submissions received regarding the PADR (if any).

  • The PACR must be published as soon as practical after the end of the PADR consultation period.

RIT-T guidelines for actionable ISP projects - Section 4 of the Cost Benefit Analysis guidelines

We have separate guidelines for proponents applying the RIT-Ts for projects that are designated as ‘actionable’ under the ISP and all other transmission projects that require a RIT-T. The application guidelines for RIT-Ts for actionable ISP projects are housed in the CBA guidelines (section 4). 

While the requirements are similar for all RIT-Ts, actionable RIT-Ts have some modified considerations and requirements. The CBA guidelines are written with these differences in mind and incorporate guidance for RIT-T proponents to navigate when applying the RIT-T in the context of the ISP. 

Key differences between actionable ISP projects and other RIT-T projects 

Actionable RIT-T projects: 

Other RIT-T projects: 

  • are projects identified as actionable in an ISP 

  • use project’s identified need, scenarios and name identified by the ISP

  • are not required to publish a PSCR 

  • use inputs, assumptions, scenarios and modelling consistent with the ISP except in certain circumstances 

  • must consider credible options for the project as identified by the ISP in addition to any other credible options identified by the project's proponent 

  • require an additional ‘feedback loop’ upon completion of the RIT-T to demonstrate the preferred option remains on AEMO’s optimal development path for the ISP

  • have additional binding engagement requirements, including consideration of community engagement expectations, engagement planning and reporting

  • PADR must be published by the date specified in the ISP.

  • may be referred to as non-actionable projects

  • apply the RIT-T to transmission projects where the expected cost is over the RIT-T threshold, and where other exemptions do not apply 

  • require the proponent to determine the identified need through annual planning, or in its regulatory proposal 

  • may adopt inputs and assumptions from the ISP as appropriate, but may choose to use others if they can demonstrate why adding, omitting or varying these is appropriate

  • allow the proponent to identify the credible options, which are then refined through the RIT‑T process and through stakeholder engagement

  • are constrained by some requirements only if appropriate to the project, such as the need to carry out market modelling or demonstrate best practice in engagement

  • may be large or small scale, such as replacement investment. 

Regulatory Investment Test - Distribution

Download the RIT-D Instrument

As with the RIT-T, clause 5.17.1 of the NER prescribes that we must develop and publish a document that sets out the necessary steps to undertake the RIT-D. 

This instrument sets out:

  • definitions of key terms
  • documents a proponent must have regard to when completing a RIT-D (such as our guidelines)
  • costs and benefits to include and the method to estimate their magnitude
  • advice on implementing reasonable parameters such as discount rates, scenarios and states of the world.

Where the instrument sets out what is expected within a RIT-D, our RIT-D guidelines expand on these requirements and provide guidance, examples and additional expectations to address all sections of the instrument.

Download the RIT-D Guidelines

The RIT-D application guidelines enable a robust cost benefit analysis of the project for distribution projects, consistent with the requirements of the National Electricity Rules and National Energy Objectives, and that publications and positions are predictable, transparent and consistent. The RIT-D guidelines also make the requirements of the RIT commensurate with the scale of the project and that the necessary stakeholders are engaged. The RIT-D guidelines provide guidance on:

  • its operation and application
  • the process to follow when applying the RIT-D
  • how we will address and resolve disputes raised on the application of the RIT-D.

RIT-D reports 

There are 3 reports that may need to be completed as part of a RIT-D process.

Options Screening Report (OSR)

  • This report should include a description of the identified need, the assumptions used, technical characteristics that an alternate option would require and a summary of potential credible options.

  • It must also provide guidance on how to submit a non-network option proposal for this project.

  • The consultation period on a OSR should not be less than 3 months.

  • This report is not required where there are no non-network options available.

Draft Project Assessment Report (DPAR)

  • The DPAR should include a description of the identified need, the assumptions used and a summary of submissions to the OSR (if applicable).

  • It should include a description of each credible option and a quantification of each option’s market benefit and net present value as well as the identification of the preferred option.

  • It must also include the methodologies used to quantify costs and benefits and RIT reopening triggers.

  • This report should be published within 12 months of the end of consultation on the OSR or the notice excluding the need for that report.

  • This report should have a consultation period of at least 6 weeks.

  • This report is not required if there are no non-network options and the preferred option is less than $14 million.

Final Project Assessment Report (FPAR)

  • This report should include the same matters as the DPAR, as well as a summary of and response to submissions (if any).

  • If no DPAR was required, the same topics expected of a DPAR is expected in the FPAR.

  • This report should be published as soon as practicable after consultation ends on the DPAR or after the publication of the notice excluding the proponent from drafting an options screening report.

  • This report is not required where the preferred option is less than $28 million and the report is published as part of the proponent’s distribution annual planning report.

Key features and differences

 

RIT-D
RIT-T

Who is required to submit the RIT?

  • distribution network service providers

  • transmission network service providers 

What reports are part of the RIT process?

  • options screening report (OSR) 

  • draft project assessment report (DPAR)

  • final project assessment report (FPAR)

  • project specification consultation report (PSCR)

  • project assessment draft report (PADR)

  • project assessment conclusions report (PACR)

What is the cost threshold over which a RIT is required?

  • estimated capital cost of the most expensive credible option is less than $7 million

  • estimated capital cost of the most expensive credible option is less than $8 million

What is the cost threshold for not needing a draft report?

  • estimated capital cost of the proposed preferred option is less than $14 million

  • estimated capital cost of the proposed preferred option is less than $54 million 

What are the mandatory consultation timeframes on reports?

  • minimum 3 months of consultation on OSR

  • minimum 6 weeks of consultation on DPAR

  • minimum 12 weeks of consultation on PSCR

  • minimum 6 weeks of consultation on PADR