ElectraNet - SA Energy Transformation regulatory investment test for transmission (RIT-T)

Sector: 
Segment: 
Status: 
Commencement date: 
5 June 2019
Effective date: 
24 January 2020
Contact: 
General enquiries - RIT RIT@aer.gov.au
AER reference: 
65042

Overview

On 5 June 2019, we commenced the formal process under clause 5.16.6 of the National Electricity Rules (NER) to consider ElectraNet’s request to determine that the investment identified through its SA Energy Transformation (SAET) Regulatory Investment Test for Transmission (RIT-T) satisfies the requirements of the RIT-T.

AER RIT-T determination

On 24 January 2020, in accordance with the requirements under clause 5.16.6 of the NER, the AER published its determination on whether the preferred option identified in the SAET satisfies the RIT-T.

The AER's determination is that the preferred option identified by ElectraNet through its RIT-T process maximises the net economic benefits in the National Electricity Market (NEM) and therefore satisfies the RIT-T.

This determination means that ElectraNet and TransGrid may now apply to us to recover the expected costs of the SA-NSW interconnector in transmission charges during the 2018-23 regulatory control period.

ElectraNet request to AER

Our January 2020 determination was based on estimated costs of $1.53 billion for the preferred option (referred to as Project EnergyConnect or PEC). In our determination we indicated that in the event that updated cost estimates affect estimated market benefits, we would expect ElectraNet to consider whether there has been a material change in circumstances. This reflects an obligation in the NER which requires the RIT-T proponent to reapply the RIT-T if, in the reasonable opinion of the RIT-T proponent, there has been a material change in circumstances such that the preferred option identified in the project assessment conclusions report (PACR) no longer maximises the net economic benefit. Given the estimated costs of the preferred option have increased to $2.4 billion, ElectraNet has assessed whether there has been a material change in circumstances and whether the outcome of the RIT-T, as set out in the PACR, remains valid.

On 14 September ElectraNet requested the AER accept that ElectraNet has demonstrated that there has not been a material change in circumstances as described in cl. 5.16.4(z3) and (z4) of the National Electricity Rules (NER).  On 28 September 2020, we provided a response to ElectraNet’s request. ElectraNet and TransGrid have subsequently lodged contingent project applications to the AER.

Background

The RIT-T is an economic cost–benefit analysis that is used by transmission businesses to assess and rank different electricity investment options. The RIT-T is a requirement for transmission investments over $6 million.

ElectraNet published the Project Assessment Conclusions Report (PACR) for the SAET RIT-T on 13 February 2019. The preferred option identified in the PACR involves constructing a new 330 kV interconnector between Robertstown in South Australia and Wagga Wagga in New South Wales. It also includes a 220 kV spur from Buronga in NSW to Red Cliffs in Victoria. The estimated cost is $1.53 billion with a completion date of 2022 to 2024.

On 5 June 2019, the AER commenced its preferred option assessment process for SAET RIT-T following a written request from ElectraNet that the AER make a determination on whether the preferred option identified in the SAET RIT-T satisfies the RIT-T. 

Under clause 5.16.6 of the NER, the AER has no more than 120 business days to make and publish a determination, subject to requests for further information. Accordingly, we published our determination ahead of the statutory deadline of March 2020.

Our role in the preferred option assessment process is to assess the transmission business’s compliance with the RIT‒T and NER rather than to undertake a full merits review. Where instances of non-compliance are identified, the AER may, as part of its determination, direct the RIT-T proponent to amend its final report to ensure the RIT-T is applied in accordance with the requirements of the NER.