Overview

Type
Sector
Electricity
Segment
Distribution
Transmission
Status
Current
Date initiated
Effective date
Categories
Regulatory investment test and guidelines
AER reference
63054

On 20 November 2018 the AER published a final determination upholding the decision of the draft determination. Broadly, our decision stipulated that if the estimated capital cost of the investment option:

  • exceeds $6 million, a RIT-T applies
  • exceeds $6 million, a RIT-D applies
  • falls below $43 million, a RIT-T proponent can skip the 'project assessment draft report' consultation step
  • falls below $11 million, a RIT-D proponent can skip the 'draft project assessment report' consultation step
  • falls below $22 million, a RIT-D proponent can include its 'final project assessment report' as part of its 'distribution annual planning report

When reviewing the RIT cost thresholds, we also reviewed the cost thresholds under S5.8(g) and S5.8(b2)(4) of the Rules, which concern how distribution businesses should report on committed investments and network assets in their distribution annual planning reports.

Separately, the Energy Security Board (ESB) is coordinating the work of the Australian Energy Market Commission, the Australian Energy Regulator and the Australian Energy Market Operator on planning and regulation of the transmission system and interconnection. This review is not impacted by nor does it impact that coordination of work of the ESB.

Background

On 31 July 2018, the AER initiated a review of the cost thresholds associated with the regulatory investment test for transmission (RIT-T) and the regulatory investment test for distribution (RIT-D) (collectively, the 'RITs').

When exploring whether to undertake a large network investment, network businesses must apply a cost benefit analysis under a RIT to identify the most efficient investment option. When applying a RIT, network businesses can skip some parts of the consultation process if the large investments they are exploring are still less than a certain size. The RIT cost thresholds determine what constitutes a sufficiently 'large' network investment for these purposes.

Under clause 5.15.3 of the Rules, we review the RIT cost thresholds every three years to reflect changes to input costs.