Issue date
AER reference
NR 011/07

The Australian Energy Regulator today issued its draft decision on the transmission determination to apply to SP AusNet's Victorian electricity transmission network for the regulatory control period 1 April 2008 to 31 March 2014.

This is the first draft decision released by the AER under the new chapter 6A of the NER, which commenced in November 2006.

"The draft decision provides for $732.5m worth of investment in SP AusNet's electricity transmission network over the next six years, which is 59 per cent above the amount approved for the current regulatory period," AER Chairman, Mr Steve Edwell, said.

"While Victorian consumers and the national electricity market have been well served by SP AusNet's electricity transmission infrastructure to date, the fact that a significant number of assets are approaching the end of their expected lives means that an increased level of expenditure on asset replacement and repair will be required over the forthcoming period. The approved investment allowance will allow SP AusNet to continue significant replacement and refurbishment programs that began in the current period into the next."

The AER proposes to set maximum allowed revenues for SP AusNet that increase from $410.5 million in 2008-09 to $513.2 million in 2013-14. The total revenue allowance for the forthcoming period is $2 762.3 million, which is 54 per cent above the $1 794.6 million allowance for the current period.

The maximum allowed revenue set out in the draft report will result in a nominal per MWh "price" of $9.61 in 2013-14, compared to the current per MWh price of $7.54 in 2007-08. This amounts to an average increase of 4.2 per cent per year.

For the first time, the AER's draft decision also includes determinations on a proposed pricing methodology for prescribed services, and a proposed framework and negotiating criteria for negotiated 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 14 November 2007. The AER will hold a pre-determination conference on this draft decision in Melbourne on Tuesday 11 September 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 its draft decision before issuing its final decision.


The Australian Energy Regulator is responsible for the economic regulation of monopoly transmission services in the National Electricity Market. These functions were conferred on the AER by the National Electricity Law and the National Electricity Rules on 1 July 2005.

The AER must make transmission determinations for Transmission Network Service Providers in accordance with the NER in respect of prescribed and negotiated transmission services.

A transmission determination for a TNSP consists of:

  1. a revenue determination for the provider in respect of the provision by the provider of prescribed transmission services
  2. a determination relating to the provider's negotiating framework
  3. a determination that specifies the Negotiated Transmission Service Criteria that apply to the provider and
  4. a determination that specifies the pricing methodology that applies to the provider.

On 28 February 2007, SP AusNet submitted a revenue proposal, proposed negotiating framework and proposed pricing methodology to the AER in accordance with the new provisions of the NER. This is the AER's draft decision on the transmission determination for SP AusNet for the forthcoming 1 April 2008 to 31 March 2014 regulatory control period.

SP AusNet owns, operates and maintains over 6,500 kilometres of high voltage transmission lines, spanning approximately 227,600 square kilometres throughout Victoria. The network serves over 1.8 million households and 280,000 businesses, transporting in excess of 45 million MWh of energy each year.

The transmission arrangements in Victoria, which separate the network asset owner (predominately SP AusNet) from the investment decision-maker (VENCorp), are unique in the NEM. SP AusNet owns and operates the transmission network and provides bulk transmission services to VENCorp under a network agreement. VENCorp owns no transmission assets itself. It provides shared network services to users and is responsible for planning and directing the augmentation of the shared network (which excludes the connection facilities utilised by generators and distribution bodies).

VENCorp's transmission determination will be the subject of a separate draft decision.