TransGrid and ElectraNet – Project EnergyConnect contingent project

  • Accepting submissions
Sector: 
Segment: 
Status: 
Commencement date: 
30 September 2020
Effective date: 
1 July 2021
Contact: 
General enquiries - Contingent projects contingentprojects@aer.gov.au
AER reference: 
65362

Overview

On 3 May 2021 the AER commenced public consultation on revised contingent project applications received from TransGrid and ElectraNet for Project EnergyConnect.

TransGrid and ElectraNet have responded to the AER's preliminary position on forecast capital expenditure required to deliver the project, and provided Board resolutions committing the businesses to proceed with the project. The total project cost now proposed by TransGrid and ElectraNet is approximately $2.33 billion. The AER is seeking public submissions on the additional material provided by TransGrid and ElectraNet, principally in relation to:

  • the occurrence of the project trigger event in terms of the businesses' commitments to proceed with the project, and
  • the forecast capital expenditure required to deliver the project.

Following this consultation process, the AER will make a final determination on the contingent project applications as soon as practicable.

The National Electricity Rules provide a period of 40 business days for the AER to make a determination following receipt of a contingent project application.

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 $2.4 billion initially proposed by TransGrid and ElectraNet.

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.

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. We are only required to determine the expenditures and incremental revenue required to deliver the contingent project if we are satisfied that the pre-defined trigger event has occurred.