There are several regulatory processes which the Australian Energy Regulator (AER) must conduct following the completion of the Regulatory Investment Test for the proposed interconnector between SA and NSW. The Energy Security Board’s proposed rule change would allow the AER to conduct two of these processes concurrently rather than sequentially, shortening the time necessary for the networks to begin delivering the proposed investment.
In considering this rule change, the AEMC propose to use the following principles in assessing whether the rule change would be in the long-term interests of consumers:
- Making the investment at the right time
- Minimising inefficient increases in regulatory cost
- Promoting certainty for the market about project status.
While we agree it is important that the investment be made at the right time, consideration must be symmetrical. Accordingly, this must also consider the potential impacts on the price-reliability trade-off should an investment be made too early, not just if it is made too late as the AEMC have proposed.
The rule change does not propose to add a new level of regulatory oversight – indeed it intends to reduce it, by adjusting existing processes and reducing the time given to the regulator to make its decisions. The burden of proof must involve demonstrating that the proposed change to the existing regulatory framework will result in overall better outcome for consumers.
We consider the third principle to be unnecessary for this rule change. The question of certainty can largely be subsumed into the first principle regarding the efficient timing of the investment.
We also highlight that this rule change is limited to the current SA-NSW interconnector proposal identified in the 2018 Integrated System Plan (ISP) and the subject of ElectraNet’s RIT-T. PIAC considers this is a unique situation as this is the first iteration of the ISP. PIAC does not expect, nor can we accept, this becoming routine for ISP projects. We recommend expressly excluding this project (and this process to expedite it) from serving as a precedent in any potential future project assessment processes.