Overview

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

On 19 November 2021, the AER published a final determination on the 2021 cost threshold review for the regulatory investment test for transmission (RIT-T) and the regulatory investment test for distribution (RIT-D) (collectively RITs). Our final determination upholds the decision of the draft determination published on 10 September 2021. Broadly, the AER's final determination is that if the estimated capital cost of the investment option:

  • Exceeds $7 million, a RIT-T applies 
  • Exceeds $6 million, a RIT-D applies 
  • Falls below $46 million, a RIT-T proponent can skip the ‘project assessment draft report’ consultation step 
  • Falls below $12 million, a RIT-D proponent can skip the ‘draft project assessment report’ consultation step 
  • Falls below $24 million, a RIT-D proponent can include its ‘final project assessment report’ as part of its ‘distribution annual planning report’ 
  • Exceeds $200,000, a network business can combine information in its annual planning report for assets it expects to retire or de-rate 
  • Exceed $2 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. 

Background

On 30 July 2021, the AER initiated a review of the cost thresholds associated with RITs. The review was conducted in accordance with clause 5.15.3 of the National Electricity Rules (NER). On 10 September 2021, we published the draft determination for the 2021 cost thresholds review which was followed by 6 weeks of stakeholder consultation, concluding on 15 October 2021. We received 4 submissions from stakeholders which can be accessed here.

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. The last RIT cost threshold review was undertaken in 2018.

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.