On 22 April 2026, we received a compliant revenue proposal from Transgrid for its System Strength Project.
On 30 June 2026, we published our preliminary position paper which provided an early indication of our assessment of Transgrid's revenue proposal. It identified the key areas of focus which we considered required most stakeholder attention in making our revenue determination.
On 23 September 2026, we made our final decision for the System Strength Project, within the required 126 business day timeframe. Consistent with the requirements of clause 53(4) of the EII Regulation and following Infrastructure Planner notification that financial close had been achieved, we published our final decision 30 September 2026.
Our decision sets out the revenues that Transgrid can recover for the System Strength Project from 1 October 2026 to 30 September 2031. These amounts are based upon our assessment of the prudent, efficient and reasonable costs for the project and may be amended annually through approved adjustment mechanisms should certain circumstances occur.
Under the EII Act, Transgrid is required to be paid by the Scheme Financial Vehicle (SFV) in accordance with our revenue determination. The SFV recovers these costs (and other NSW Roadmap costs) from NSW electricity distributors, who in turn recover these costs from NSW electricity customers via their retail bills.
Background
We have a role in making revenue determinations for Network Operators who are authorised or directed to undertake network infrastructure projects. We are undertaking this role as Regulator under the NSW Electricity Infrastructure Investment Act 2020 (EII Act).
In making a revenue determination, we must consult with the Infrastructure Planner (in this case, the Secretary of NSW Department of Climate Change, Energy, the Environment and Water (DCCEEW)). We are required to assess whether the proposed expenditures for the project are prudent, efficient and reasonable.
Under the National Electricity Rules, Transgrid is the designated System Strength Service Provider for NSW. It is responsible for planning to ensure the system strength standards set out by the Australian Energy Market Operator are met. These standards ensure an ongoing secure and stable power system across the state.
In 2025, transmission system planning processes identified a potential future shortfall in system strength in NSW. This prompted the NSW Government to issue a Priority Network Infrastructure Project (PNIP) Direction Order under the EII Act for the System Strength Project. The PNIP direction requires Transgrid to carry out the System Strength Project and submit a revenue proposal for the System Strength Project to the AER for our assessment. In March 2026, the NSW Government issued an updated version of the PNIP direction to cover transport works required for delivery of the System Strength Project.
The System Strength Project involves the deployment of 10 synchronous condensers that will work to maintain voltage and system stability. Transgrid proposed that 2 synchronous condensers be deployed at each of the 5 locations across NSW, ranging from Darlington Point in the south to Armidale in the north. Transgrid’s deployment of synchronous condensers to locations in its network is part of a broader portfolio of solutions to maintain system strength in NSW.
The PNIP direction also required the System Strength Project be delivered through a mix of competitively procured (contestable) elements and a non-contestable element. Under the hybrid approach we must consider the outcomes from any contestable processes to be prudent, efficient and reasonable if we find the processes to be genuine competitive processes. For non-contestable elements, we determine whether they are prudent, reasonable and efficient through a detailed review of the underlying costs of those elements.
We do not decide the scope or timing of network infrastructure projects under the EII Act. For PNIPs, the Infrastructure Planner recommends the project scope and timing for a decision by the Minister.
We are required to make our hybrid revenue determination in accordance with the EII Act, the EII Regulation and our Revenue determination guideline for NSW non-contestable network projects (the Guideline). The Guideline sets out our approach to hybrid revenue determinations, where there are contestable and non-contestable components.