Announcement date
7 July 2022
Link to announcement
Material change in network infrastructure project costs | AEMC
Problem being addressed
This determination process responds to concerns with the implementation of the Regulatory Investment Test (RIT) process, which is a form of cost benefit analysis. The purpose of the RIT is to identify network investments that maximise the present value of net economic benefits in the market. Before investing in a significant transmission or distribution project to meet an identified need on the network, a proponent must consider all credible options (including potential non-network solutions) to meet that need, before selecting the option that maximises the net economic benefit across the market.
Under existing arrangements, the RIT must only be reapplied where, in the reasonable opinion of the project proponent, there has been a material change in circumstances. However, there are examples of where the RIT has not been triggered, despite significant increases in transmission costs.
Proposal
The draft rule aims to provide clarity on the process for determining whether a material change in the circumstances has occurred for the RIT. In addition, the rule also seeks to improve cost estimate accuracy by clarifying the rules governing the guidelines for RITs in order to support strengthened guidelines for cost estimate development.
Stakeholders are invited to make written submissions to the draft determination by 1 September 2022.
Assessed RIS outcome
Compliant consultation RIS