The Australian Energy Regulator today issued its draft decision on the transmission determination to apply to ElectraNet's electricity transmission network for the regulatory control period 1 July 2008 to 30 June 2013.
ElectraNet is the principal electricity transmission network service provider in the South Australian region of the National Electricity Market.
The AER proposes to set the maximum allowed revenue for ElectraNet of $209 million in 2008–09. The allowed revenue will increase to $271 million in
2012–13. The increase in the revenue allowance in 2008–09 represents a 12 per cent increase over 2007–08. The total revenue allowance over the regulatory control period is $1195 million.
The revenue allowance is based on an opening asset value of around $1.2 billion and a weighted average cost of capital of 9.66 per cent.
"The draft decision provides for $606 million worth of investment in ElectraNet's electricity transmission network over the next five years, which represents an increase of more than 35 per cent from the current level of $443 million for the past five years," AER Chairman, Mr Steve Edwell, said. "A further investment allowance of $805 million is provided should certain defined triggers occur within the regulatory control period."
"While ElectraNet has performed well during the current regulatory period, implementing its approved capital expenditure prudently and within the level of approved expenditure, there is a need to significantly increase capital expenditure in the forthcoming period. This increase is largely driven by the need to meet the new reliability standards specified in the South Australian Electricity Transmission Code (ETC)* and to replace ageing network assets," he said.
"ElectraNet's investment expenditure is accompanied by increases in average transmission charges in nominal terms of under 6 per cent per year over the regulatory control period," Mr Edwell said. "Transmission charges represent about 10 per cent of the average cost of final delivered energy in South Australia. This increase is primarily due to the need for increased investment associated with the new reliability standards specified in the ETC, ageing assets, high construction materials and labour costs, and increased operating expenditure to maintain an expanding network."
The AER's draft decision also approves ElectraNet's negotiating framework and negotiating criteria for negotiated transmission services.
In making its draft decision, the AER took into account submissions from interested parties and advice from independent experts. These documents will be available on the AER's website.
The AER invites written submissions in response to its draft decision, which close on 18 February 2008. The AER will hold a pre-determination conference in Adelaide on 11 December 2007 for the purpose of explaining its draft decision and receiving oral submissions from interested parties. The AER will consider all issues raised by interested parties in response to the draft decision before issuing its final decision.
*The ETC is determined by the Essential Services Commission of South Australia under the Essential Services Commission Act 2002 (SA).
Under the National Electricity Law (NEL) and the National Electricity Rules (NER), the Australian Energy Regulator is responsible for the economic regulation of electricity transmission services provided by transmission network service providers (TNSPs) in the National Electricity Market (NEM). Before 1 July 2005, the ACCC was responsible for regulating ElectraNet's revenues. ElectraNet's current revenue cap expires on 30 June 2008.
The AER makes determinations according to chapter 6A of the NER in respect of certain services provided by transmission businesses. The AER's principal task is to set the revenues that a TNSP can receive from the provision of prescribed transmission services.
On 31 May 2007, ElectraNet submitted a revenue proposal, proposed negotiating framework and proposed pricing methodology to the AER in accordance with chapter 6A of the NER.
ElectraNet's transmission network spans more than 1000 km from the Victorian border near Mount Gambier to Port Lincoln on the Eyre Peninsula. It operates radial extensions of over 200 km each from the main network to Leigh Creek, the Yorke Peninsula and Woomera. It connects major generation sources at Port Augusta, Torrens Island and the eastern states via the Heywood and Murraylink interconnectors. Additional generation sources are connected in the south east of the State and on the Eyre and Yorke Peninsulas.
ElectraNet operates over 5611 circuit kilometres of transmission lines that function at nominal voltages of 275 kV, 132 kV and 66 kV. Further, it operates and maintains 76 substations which include 8828 mega volts ampere (MVA) of installed transformer capacity throughout South Australia. Transmission from the main network to country areas of South Australia is characterised by long radial 132 kV lines.