Electricity networks are seeking a rule change to streamline investment processes, citing the need to reduce 'red tape'. However, critics argue that this move could potentially open a new avenue for 'gold-plating'.
Energy Networks Australia (ENA) is advocating for a review and an increase in the $8 million threshold, which would push more expensive 'replacement' projects into the public cost-benefit process. They also want projects that replace one piece of equipment with the same type to be exempt from the process entirely, requiring only a notification to the regulator about the lack of feasible alternatives.
This request is causing concern among some stakeholders in the energy sector, particularly as it comes at a time when the Australian Energy Market Commission (AEMC) is considering a significant hike in fixed charges that consumers currently pay. Consumers are already shouldering a substantial portion of the costs for new transmission lines, with examples such as Transgrid seeking $1.1 billion in extra transmission costs and the Australian Energy Regulator (AER) approving the passing on of $3.4 billion in costs to households.
Nexa Advisory CEO Stephanie Bashir believes that removing projects from public cost-benefit tests is counterproductive, especially when consumers are already facing record-high electricity bills. She argues that more transparency and accountability from network businesses, particularly Distribution Network Service Providers (DNSPs), are needed, not less.
ENA's chief, Dominique van den Berg, believes there are valid reasons to revert to the 2017 system, when replacement projects were added to the public interest Regulatory Investment Test for Transmission (RIT-T). He claims that the 2017 rule change increased compliance costs and delayed essential investment without delivering significant consumer benefits.
However, the current threshold of $8 million is seen as 'out-of-step' with the costs of delivering transmission projects and the costs of preparing RIT-Ts. To address concerns about shutting public feedback out entirely, ENA has modified its rule change proposal, allowing stakeholders to share their views in response to a notice of determination rather than a RIT-T process.
Despite the concerns, the regulator may not be inclined to loosen public interest requirements on replacement projects just yet, given that replacement costs still constitute a significant portion of transmission budgets.
