After undertaking a large scale review of the application guidelines for the regulatory investment tests (RITs), the AER published version 3.0 of the RIT application guidelines.
The RIT is a cost benefit analysis that network businesses must perform and consult on before making major investments in their networks. When undertaking this cost benefit analysis, network businesses must give due consideration to what options are out there, before identifying the best way to address needs on their networks. There is a separate, although fundamentally similar, cost benefit analysis for transmission and distribution networks – the ‘RIT-T’ and ‘RIT-D’. The RIT-T and RIT-D have their own guidelines to help network businesses apply each cost benefit analysis consistently and transparently.
We commenced our review of the guidelines in December 2017. While we previously updated the guidelines in September 2017, these updates were limited to incremental changes necessary to give effect to the the repex rule change, which expanded the scope of the RITs to apply to replacement projects.
Our large scale review of the guidelines explored improvements that:
- The Council of Australia Governments Energy Council (COAG EC) identified in its RIT–T review.
- Arose out of the repex rule change, although more detailed guidance on applying RITs to repex project is included in a companion piece to the guidelines, our industry practice application note for asset replacement planning.
- Have been identified from our compliance and monitoring activities.
- Stakeholders identified through our consultation process.
- Can guide network businesses on using the Australian Energy Market Operator's (AEMO's) integrated system plan to most effectively take a consistent and whole-of-system approach when applying the cost benefit analysis.
The focus of this guidelines review has been to improve guidance for applying the current RITs under the current regulatory framework. It is worth noting that ongoing developments to convert AEMO's integrated system plan into action may lead to changes to the National Electricity Rules that would warrant further review of the guidelines, as well as the RITs themselves.