The AER has today published its final decision on the amounts payable to Transgrid for its System Strength Project for the 2026–31 regulatory period. We are undertaking this role as Regulator under the NSW Electricity Infrastructure Investment Act 2020 (EII Act).
The System Strength Project involves the deployment of 10 synchronous condensers at 5 sites that will work to maintain voltage and system stability and is part of a broader portfolio of solutions to maintain system strength in NSW. The Project was directed by the NSW Energy Minister to be undertaken by Transgrid as a Priority Network Infrastructure Project.
The System Strength Project is the first time under the EII framework that we are required to make a revenue determination for an infrastructure project that includes both contestable and non-contestable components. We refer to these as hybrid revenue determinations. Our hybrid revenue determination sets out our assessment of Transgrid’s forecast costs to ensure it only recovers from NSW electricity consumers costs that are prudent, efficient and reasonable for carrying out the project.
Under the hybrid approach, we must consider the outcomes from any contestable processes to be prudent, efficient and reasonable if we find them to be genuine and appropriate competitive processes. For non-contestable elements, we determine whether the costs of those elements are prudent, reasonable and efficient through a detailed review of the costs comprising those elements. For the System Strength Project there were two contestable elements and one non-contestable element. In December 2025 and March 2026, we found the tenders undertaken by Transgrid for the Synchronous Condenser and Associated Works contestable works packages, were genuine and appropriate processes.
Our final decision on Transgrid’s System Strength Project allows for $385.6 million ($, nominal) in revenue to be recovered from NSW electricity consumers over the 2026–31 period via a schedule of quarterly payments to be paid to Transgrid. This is a decrease of $15.2 million (3.8%) from Transgrid’s proposed revenue which primarily reflects our final decision to not accept Transgrid’s provisional sums for specified risk events as we did not consider them to be an outcome of the genuine and appropriate competitive assessment processes. Our decision is that these risks be addressed through a combination of risk costs included in the ex-ante capex allowance and adjustment mechanisms.
Our final decision also includes incentives for Transgrid to carry out the project efficiently and allows for the adjustment of Transgrid’s allowed revenue under certain specified circumstances.
We have made our determination on Transgrid’s System Strength Project revenue proposal in accordance with the EII Act, the EII Regulations and our Revenue determination guideline for NSW non-contestable projects. We are required to remake our revenue determination at least once every five years.