Final rule to fast-track approval processes for network investors
The Australian Energy Market Commission (AEMC) has made a final rule to remove barriers so that network businesses can speed up their investments in time-critical projects.
The final rule released today will support earlier answers being provided to network businesses which need to know if the costs of contingent projects will be recovered. This may also allow time-critical projects to progress more quickly – particularly those which have been identified as priority projects in the Australian Energy Market Operator’s Integrated System Plan.
Contingent projects are major network infrastructure assets which have been pencilled in to long-term investment plans. Contingent projects are flagged in network revenue proposals, and approved by the Australian Energy Regulator (AER) in revenue determinations. When a network business has met the requirements to request cost recovery from consumers for one of these projects, it submits a contingent project application to the AER. Currently, network businesses cannot submit a contingent project application for approval in the last 90 business days of a regulatory year.
The final rule allows transmission and distribution network businesses to submit a contingent project application at any time during a regulatory control period up until the last 90 business days of the second last year of a regulatory control period.
Contingent project applications would continue to be prevented from being submitted in the final year of a regulatory control period, and the 90 business days before the end of the second last year of a regulatory control period. This is because there needs to be a regulatory year left in the regulatory control period for revenue to be adjusted.
The final rule does not affect whether and when a network business can recover costs from consumers for a contingent project. It brings AER consideration and approval of a contingent project forward three to four months if the application is submitted prior to the second last year of a regulatory control period.
The final rule was made in response to a rule change request from Energy Security Board Chair, Dr Kerry Schott AO. The request followed a meeting of the COAG Energy Council in December 2018, where Ministers agreed on an approach to deliver the priority transmission projects identified in the Australian Energy Market Operator’s Integrated System Plan as soon as possible, including rule changes to streamline regulatory processes.
As the rule change request was considered non-controversial, the AEMC followed an expedited rulemaking process. The new rule starts on 2 May 2019.