TransGrid and ElectraNet – Project EnergyConnect contingent project

Sector: 
Segment: 
Status: 
Commencement date: 
30 September 2020
Effective date: 
31 May 2021
Contact: 
General enquiries - Contingent projects contingentprojects@aer.gov.au
AER reference: 
65362

Overview

On 31 May 2021 the AER published details of its final decisions to determine costs for Project EnergyConnect, the AER’s final regulatory approval for the South Australia to New South Wales interconnector to be built by ElectraNet and TransGrid. 

Our decisions will provide ElectraNet and TransGrid with the incremental revenues required to deliver Project EnergyConnect as soon as practicable, while also ensuring that consumers pay no more than necessary to deliver the project. This final decision on forecast costs for the project builds on AER's preliminary positions published in December 2020, taking into account updated information submitted by ElectraNet and TransGrid in April 2021, submissions from stakeholders, and expert technical advice.

Project EnergyConnect involves the construction of a new 860 km 330 kV interconnector between Robertstown in mid-north South Australia and Wagga Wagga in New South Wales, with an augmentation between Buronga and Red Cliffs in north-western Victoria

ElectraNet and TransGrid initially proposed total capital expenditure of $2.36 billion ($2017-18) to deliver the project within the 2018­–23 regulatory control period. Our decision departs from ElectraNet and TransGrid's applications by providing for a reduced capital expenditure forecast of $2.28 billion. The AER's rigorous assessment of the forecast project costs has helped to ensure consumers pay no more than is needed to build the new interconnector.

Background

On 18 December 2020, the AER published its preliminary position on TransGrid and ElectraNet’s applications to amend their existing revenue determinations to account for the costs of delivering the new South Australia to New South Wales interconnector (Project EnergyConnect) in the 2018–23 regulatory control period.

At that time, the AER considered that it was unable to make a final determination on TransGrid and ElectraNet's applications because the businesses had not yet committed to proceed with the project as required by the defined contingent project trigger event. Our preliminary assessment was that the prudent and efficient capital cost for the project was $2.15 billion, a 9 per cent reduction from the $2.36 billion initially proposed by TransGrid and ElectraNet.

In March and April 2021, ElectraNet and TransGrid provided responses to our preliminary position, including additional supporting information on forecast capex, and Board resolutions committing to proceed with the project subject.

Our role is to determine the prudent and efficient capital and operating costs required to construct the Project EnergyConnect contingent project, and the incremental revenue that TransGrid and ElectraNet may recover within the 2018–23 regulatory control period to fund the project.

Funding for additional revenue for a contingent project is permitted under clause 6A.8.2 of the National Electricity Rules through an adjustment to maximum allowed revenues under existing revenue determinations. In order for a transmission network service provider to be able to apply to amend its revenue determination to increase allowed revenues for a contingent project, the specified trigger event must have occurred.